Sony Corp. v. Iancu (Fed. Cir. 2019)

Sony’s patent no. 6,097,676 is directed toward multiplex audio recordings with each channel having a different language translation.  Back in 2015, SONY sued ARRIS for infringing the ‘676 patent. (One of several infringement lawsuits between the companies).  In 2016, ARRIS turned-around and filed for inter-partes-review (IPR). The PTAB instituted as to two claims (5 and 8) and found them unpatentable (obvious).  That final written decision was issued in September 2017. ARRIS and SONY subsequently settled their ongoing litigation and in November 2017.  At that point SONY appealed and the USPTO intervened to defend the PTAB decision.  The patent had also already expired (August 2017).

On appeal, the majority and dissent argued over standing — whether there was any ongoing case-or-controversy since the patent expired in 2017 and the parties settled. Judge Newman – The Great Dissenter – argued that the court lacked jurisdiction:

There is no interest, neither private interest nor public interest, in the fate of this patent. There appears to be no consequence of either our appellate decision today or the potential PTAB decision on the remand now ordered by the court.

The majority opinion authored by Judge Dyk and joined by Chief Judge Prost held otherwise:

It is well-established that our decision (and the Board’s decision on remand) would have a consequence on any infringement that occurred during the life of the ’676 patent.

I agree with the majority here. The patentee has a right to defend its patent against cancellation by the USPTO even after expiration — and up to the six-year timeline for back-damages.

Setting procedure aside. On the merits, the majority agreed with the patentee Sony – that the PTAB had erred in claim construction.  Here, this is a case where means-plus-function language helped the patentee with a narrow claim construction.

The patent here appears to be fairly broadly drafted — claiming an “information reproducing device” that is able to play “a plurality of voice data, each voice
data having similar contents translated into different languages are multiplexedly recorded as audio data of plural channels.”  The device has a “default code” for which language to play.

The argument on appeal involved the term “reproducing means for reproducing the audio data of the channel designated by the default value stored in the storing means.”  As a means-plus-function term, the element was interpreted on appeal under 112(f):

(f) Element in Claim for a Combination.— An element in a claim for a combination may be expressed as a means or step for performing a specified function without the recital of structure, material, or acts in support thereof, and such claim shall be construed to cover the corresponding structure, material, or acts described in the specification and equivalents thereof.

Here, although you might imagine that the “reproduction means” is some piece of hardware, the patent only describes it in software form.  The result is that the best interpretation of the claim term also limits it to software form — since means plus function limitations are construed only “to cover the corresponding structure, material, or acts described in the specification and equivalents thereof.”  The prior art described the claimed means in hardware form rather than software. On remand, the PTAB will need to determine whether the claims remain obvious in light of that narrowed claim construction.

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Important quote from the case:

We are not bound by the parties’ arguments as to claim construction. See Exxon Chem. Patents, Inc. v. Lubrizol Corp., 64 F.3d 1553, 1555–58 (Fed. Cir. 1995) (“[T]he [court] has an independent obligation to determine the meaning of the claims, notwithstanding the views asserted by the adversary parties.”).

Guest Post by University of Missouri Law Professor Brook Gotberg.  Prof. Gotberg is an expert in debtor-creditor relationships, including bankruptcy. I asked her for thoughts on the Supreme Court’s recent Bankruptcy-IP decision in Mission Product Holdings. – DC

by Brook Gotberg

As a guest blogger on this site invited to talk a bit about Mission Product Holdings, Inc. v. Tempnology, LLC, I approach this topic with some consternation.  The Supreme Court’s position in this case has broken the traditional understanding of § 365 of the Bankruptcy Code, and may have larger ramifications for how we read the Bankruptcy Code overall.

Let me back up a bit.  Bankruptcy provides some pretty fantastic opportunities for debtors to shift the traditional balance of power between them and their creditors, which is typically why companies are motivated to file.  A struggling or insolvent company doesn’t need bankruptcy – they could attempt a creditor-by-creditor workout, use state court proceedings, or just throw in the towel and let the creditors snap up assets in a race to the courthouse.  Provisions in the Bankruptcy Code are intended to preserve and maximize value, often by restraining creditors from invoking their rights under state law.  For example, the automatic stay prohibits secured creditors from repossessing the debtor’s property, even if the debtor has clearly defaulted on its security agreement.  As long as the debtor remains in bankruptcy, it retains control of the property and there is nothing the creditor can do about it, other than petition the court for so-called “adequate protection” to cover the risk of loss or depreciation, or for an order of relief from the automatic stay, which will only be granted if the debtor doesn’t need the property to reorganize.  The stay gives a debtor the chance to make more of the property, which benefits all creditors of the estate.  There are tons of other examples, all of which paint the picture of the Bankruptcy Code as a place where rights are reevaluated and often held in abeyance, so long as this reevaluation is in the interest of the debtor’s bankruptcy estate, and by extension, its creditors.

Under the view of § 365 that prevailed prior to this opinion, the debtor’s ability to reject executory contracts and all of their associated rights falls right in line with the idea of value preservation for the estate.  The debtor’s use of § 365 is typically unfortunate for any the creditor on the other side of the contract, but is only approved by the bankruptcy court when in the best interests of the estate.  Section 365 allows the debtor to cut off a creditor’s rights to ongoing performance under the contract at a discount rate – whatever percentage the debtor plans to pay all other unsecured creditors pursuant to the plan of distribution.  It also allows the debtor to put whatever resources or performance requirements that existed on its end of the contract to more advantageous uses.  The typical example of how § 365 works is a futures contract.  If the debtor made a contract to sell soybeans at $9.25 a bushel, but the price has since gone up to $10.00 a bushel, upon filing for bankruptcy the debtor can reject its contract and go sell the soybeans at the higher price, increasing the overall amount to be distributed while simultaneously decreasing the amount the original soybean purchaser will benefit from the transaction.

How does this view of § 365 apply in a case about trademark licenses?  Tempnology was able, pursuant to § 365, to reject its contract with Mission Products.  Tempnology had previously granted Mission Products the license to use its trademark and logo to sell and promote Tempnology products, while simultaneously granting a right to distribute those products.  Under a traditional view of § 365, this would mean that Mission Products loses the right to use the trademark and logo, but has a claim against Tempnology for damages caused, which is treated like a pre-petition debt.  Tempnology can pay that debt as an unsecured claim, and also give those trademark and logo rights to someone else, even if the original agreement was for exclusive rights.  (The one in this case was not.)

For many, including the original bankruptcy court and the First Circuit, who both ruled on this issue in Tempnology’s favor, this outcome is supported by the language of the statute and one of the stated exceptions, laid out in § 365(n), which gives a licensee of “intellectual property” the ability to retain its rights under the contract for the duration of the contract if it chooses.  “Intellectual property” is defined under the Bankruptcy Code to include patents, trade secrets, and copyrights to semiconductor chip products, but not trademarks.  See 11 U.S.C. § 101(35A).  If there is a carve out to retain contract rights under the exception in § 365(n), then by negative inference, that carve out doesn’t apply in other situations, even analogous situations involving trademarks.

But the Supreme Court reads it all differently.  They see § 365(n) as a manifestation of what the rule ought to be, rather than an exception.  They note that Congress drafted the exceptions in § 365(n) to “correct” former judicial rulings, and conclude that a breach of contract in a trademark licensing situation doesn’t give the licensor the right to claw back the trademark.

I find the rejection of the negative inference to be a bit shocking, along with the apparent willingness of the entire court to reinterpret the Code on Congress’ behalf to read out that inference.  I also wonder, how does Tempnology breach the contract by rejecting it if Mission Products retains all its rights to the trademark?

Perhaps even more alarming is the Court’s reference to the trustee’s avoidance actions as an argument for a more narrow reading of § 365.  The Court suggests that giving power to a debtor to pull value back into the estate should be limited to §§ 544-553, which allows a trustee to avoid transfers away from the state for fraudulent conveyances and preference actions.  These provisions are, again, intended to maximize the estate, even when doing so hurts individual creditors.  Rather than seeing these provisions as consistent with § 365, the Court notes how “far away” § 365 is from those provisions.  This is a bizarre argument from the perspective of individuals who work with the Code.  Both chapter 3 and 5 in the Code contain “general” provisions that apply to all bankruptcy cases, from chapter 7 to chapter 15.  (The automatic stay, which affects creditor rights as noted above, is in § 362).  It feels like the Justices just created a reason for the ordering of the Bankruptcy Code sections that didn’t exist previously, namely, that the drafters of the Code wanted to restrict any efforts to enlarge the bankruptcy estate to trustee avoidance actions, and that these actions themselves should be “cabined.”

So, wow.  Congressionally drafted exceptions to the rule in the Bankruptcy Code could just mean that we misinterpreted the rule to begin with, and bankruptcy isn’t about maximizing the estate by expanding the pie except for closely cabined provisions, which can be identified by virtue of their spatial separation from other provisions.  Maybe I need to rewrite my Bankruptcy syllabus.

We’re looking to hire a new director for our Entrepreneurship Legal Clinic (ELC) fairly quickly here at the University of Missouri School of Law.  The clinic is transactional (no litigation) and works with start-up companies and small businesses.

I don’t have a salary range, but it will almost definitely be a pay-cut for anyone coming out of private practice.  Hey, my salary as a law professor is still lower than my starting salary at MBHB as a first-year associate in 2003 (and I don’t get a bonus from my state-funded institution).

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The Entrepreneurship Legal Clinic (ELC) at the University of Missouri School of Law, part of the Center for Intellectual Property and Entrepreneurship (CIPE), provides free transactional legal services to creators, entrepreneurs, innovators, and inventors. The School of Law is seeking a dynamic new director to expand the ELC’s outreach to business clients in the campus, municipal, and regional communities.  The ELC director will directly supervise students participating in the transactional legal clinic, build partnerships with legal and related services firms committed to supporting start-ups positively impacting the university and community, and participate in the CIPE, Law School, and university communities.  The ELC Director provides classroom instruction, participates in client interviews, assists in and supervises the drafting legal documents, and offers legal advice regarding a range of issues faced by small businesses, including issues related to corporate formation, choice of entity, intellectual property, employment and licensing agreements, leasing, and financing decisions. The ideal candidate will have significant transactional experience including due diligence and document drafting related to business formation and intellectual property creation and protection.

Other duties will include:
•giving regular and detailed oral and written feedback to students on their performance;
•working with the CIPE Director and Law School Development office on ELC-specific fundraising efforts
•delivering instruction in relevant lawyering and practice skills;
•ensuring professional, ethical, high-quality representation of clinic clients;
•engaging in client and expertise development, including monitoring of relevant legal and business developments; outreach and programming for potential clients and collaborators; and maintaining relationships with clients and external partners such as campus and university system units, industry groups, and law firms;
•participating in advising students participating in the School of Law’s Business, Entrepreneurship & Tax Law Review
•assisting with curriculum design, development of teaching materials, and clinic administration and operations; and
•engaging in independent on-going client representation when necessary.

Qualifications:
•At least three years of experience in relevant transactional, business, or intellectual property practice areas or the equivalent;
•superior writing, editing and verbal skills;
•outstanding academic credentials;
•sound judgment and exceptional ethical standards;
•excellent teamwork and teambuilding skills;
•potential for successful teaching and student supervision;
•publication of articles, essays, or client alerts in media relevant to the practicing bar including municipal or state bar journals, ABA sponsored publications, or specialized journals
•strong organizational and management skills and an aptitude for law practice management and clinic management; and
•admission to practice in Missouri or ability to obtain eligibility no later than December 31, 2019.

The University of Missouri-Columbia is the flagship campus of the University of Missouri system and is one of only 34 public universities in the country belonging to the Association of American Universities. As both a research and land grant university, we have extraordinary opportunities for interdisciplinary research and teaching. In addition, Columbia is regularly ranked as one of the most livable cities in the country.

Application Procedure: Review of applications will begin immediately and continue until the position is filled. To apply, please submit a cover letter indicating teaching and scholarly interests, a CV and three references to the university’s employment portal. Questions about the application process may be directed to Associate Dean Paul Litton at littonp@missouri.edu or CIPE Director Sam Halabi at halabis@missouri.edu.

Additional information about the School of Law is available at law.missouri.edu. The University of Missouri is an equal opportunity/ADA institution and encourages applications from women, candidates of color and other under-represented communities in the legal academy. To request ADA accommodations, please call the Disability Inclusion and ADA Compliance Manager at 573-884-7278

by Dennis Crouch

Today’s Supreme Court trademark case has several important nuggets for intellectual property owners.  Here are two: First, TM licensing is somewhat clarified with the holding that a bankrupt mark-holder cannot simply cancel prior licenses as part of the bankruptcy. Second, the court’s holding here treats a  TM license effectively as a property right that has been transferred rather than a contract with ongoing mutual obligations.  In bankruptcy proceedings, ongoing contracts can ordinarily be rejected by the bankruptcy trustee while prior property transfers are only rarely rolled-back.

Mission Product Holdings Inc. v. Tempnology, LLC (Supreme Court 2019)

The details of this case are fairly obscure bankruptcy issues, but basically begin with the most interesting rule of bankruptcy law that allows the trustee to reject prior executory contracts and leases.

Here, the trademark owner has filed for bankruptcy and rejected a prior trademark license. The question in the case is whether “rejection” under the statute also rescinds the already-granted license. Here, the court holds no – if the rights would survive a contract breach by the licensor then they also survive rejection under the bankruptcy code. Writing for an 8-1 majority, Justice Kagen explains:

The question is whether the debtor-licensor’s rejection of that contract deprives the licensee of its rights to use the trademark. We hold it does not. A rejection breaches a contract but does not rescind it. And that means all the rights that would ordinarily survive a contract breach, including those conveyed here, remain in place.

Entering into property-like language, the court explains the holding as based upon “the general bankruptcy rule that the estate cannot possess anything more than the debtor did outside bankruptcy.”

I’ll note here that the court alludes to the possibility of drafting trademark licenses in ways that they could be rescinded in bankruptcy. So, be cautious about that language.

Justice Gorsuch wrote in dissent – arguing that the case should be dismissed because there is no longer any live controversy since. The license expired during litigation.

Peter v. NantKwest, Inc., No. 18-801 (Supreme Court 2019)

I believe there are many situations where it makes sense to award reasonable costs and attorney fees to the prevailing party.  It goes further to ensure that the injured party is ‘made whole’ and it also discourages folks to push forward with weak arguments.

That said, I don’t like 35 U.S.C. 145. That provision awards the USPTO “all the expenses of the proceedings” regardless of whether the agency wins or loses.  The provision works to discourage the filing of Civil Actions to obtain a patent.  In NantKwest, the USPTO is asking that “all the expenses” be interpreted to include its personnel expenses, including attorney fees, win-or-lose.  The Federal Circuit ruled against the PTO and denied such fees, but the Supreme Court has agreed to hear the case:

Whether the phrase “[a]ll the expenses of the proceedings” in 35 U.S.C. 145 encompasses the personnel expenses the USPTO incurs when its employees, including attorneys, defend the agency in Section 145 litigation.

USPTO’s opening merits brief is due later this week, with amicus filings shortly thereafter.

Until recently, the case was known as Iancu v. NantKwest.  However, in a recent letter to the Supreme Court, Solicitor Noel Francisco indicated that Iancu “is recused in this matter.” Solicitor Francisco suggested that Laura Peter be substituted as petitioner in her official capacity as the Deputy Director of the United States
Patent and Trademark Office.  Thus, the case has become Peter v. NantKwest.

The letter does not indicate the reason for Iancu’s recusal. However, NantKwest is represented by top advocate Morgan Chu from Irell & Manella.  Iancu was managing partner at Irell when the representation began.

by Dennis Crouch

Two prosecutions lessons from this case: (1) if you are concerned about obviousness, be careful of broadening statements in the specification; (2) if you want to claim a particular action, particularly claim it.  

BTG Int’l. Ltd. v. Amneal Pharms. LLC (Fed. Cir. 2019) [BTG_Decision]

This is a consolidated appeal from four different district court cases and five different inter partes review cases.  All the cases focus on BTG’s U.S. Patent No. 8,822,438 (hormone based chemotherapy).  For once, the PTAB and District Court decisions meshed – all finding the claims invalid as obvious.  On appeal, the Federal Circuit focused on one of the PTAB decisions and affirmed — with result of mooting the remaining appeals.

The ‘438 patent claims a method of “treatment” by providing a patient with (1) “a therapeutically effective amount of abiraterone acetate” and (2) “a therapeutically effective amount of prednisone.”

The patentee’s primary argument on appeal is that the “treatment” limitation in the preamble should be focused on anti-cancer treatment — and particularly that the “therapeutically effective amount of prednisone” should have an anti-cancer effect rather than ‘merely’ a palliative effect.  The prior art apparently indicated a combination of chemo + prednisone, but did not specifically indicate that the prednisone had anti-cancer impact.

On appeal, the Federal Circuit agreed with the PTO that the “treatment” element should be broadly construed.  This was seemingly a simple case because the patentee used traditional broad language in the specification:

The specification states that a “therapeutic agent” may be either “an anti-cancer agent or a steroid.”

What this means is that the prior art’s use of prednisone as a steroid (for palliative care) directly reads on the claims.

To be fair to the patentee, the patent focuses substantially on the reality that prednisone was found by the patentee to have anti-cancer effects itself.  On appeal, the court effectively says – ‘if you wanted to claim that prednisone as an anti-cancer treatment, write it in the claims.’

by Dennis Crouch

Prism Technologies LLC, v.  Sprint Spectrum L.P., dba Sprint PCS, SCT Docket No. 18-1397 (Supreme Court 2019)

The Supreme Court has received a new eligibility challenge from Prism Tech — although this one is in the form of a civil procedure question:

1. Whether the Federal Circuit Court of Appeals may retroactively expand the scope of its appellate jurisdiction to invalidate patent claims under 35 U.S.C.
   § 101 when those claims were not raised in the petitioner’s appeal or necessary for its judgment?
2. Whether a district court may disregard a mandate from the Federal Circuit for entry of judgment, and ignore this Court’s precedent, by retroactively applying
   the collateral estoppel doctrine based on a ruling in a subsequent action where there is no mutuality of claims or defenses?

Prism has parallel infringement lawsuits against Sprint and T-Mobile.

• In the case against Sprint, the jury found infringement and awarded $30 million in damages.  Sprint did not challenge the patent’s validity at trial or on appeal — damages affirmed in a 2016 appellate decision.
• In the case against T-Mobile, the jury sided with the defendant and found no-infringement.  Prism appealed, but ended up in a worse situation — with a 2017 holding from the Federal Circuit that the asserted claims are ineligible under 35 U.S.C. 101.

The basic question here is whether the late-stage invalidity in T-Mobile can be used to cancel Sprint’s adjudged liability.  So far, the courts have sided with Sprint, although it was important for Sprint’s case that it took pains to slow-walk its post-appeal activity (request for rehearing and petition for certiorari) so that the case still had some life by the time the T-Mobile decision was released.

June 23, 2017 – the Federal Circuit invalidated the patents in the T-Mobile decision. June 27, 2017 (two business days later) – Sprint filed a R.60(b) motion for Relief from Judgment based upon the Federal Circuit’s binding authority “that the patent claims underlying that judgment are invalid as unpatentable under 35 U.S.C. § 101.”  The district court complied and set-aside its prior verdict and the Federal Circuit affirmed — finding no abuse of discretion.

As part of the Sprint timeline, it is notable that the Federal Circuit issued its mandate in May 2017 (before the T-Mobile invalidity decision).  After the T-Mobile decision, Sprint unsuccessfully requested that the Federal Circuit recall the mandate.  However, the court did issue a statement that recall was “unnecessary” because the “mandate does not alter how the district court should decide the preclusive effect of the T-Mobile ruling, which did not exist in May 2017.”

Another important element here a big question about whether the T-Mobile invalidity applied to all of the claims at issue in Sprint (the Federal Circuit retrospectively said yes).

The new petition thus argues that “the Federal Circuit’s interpretation of the T-Mobile Invalidity Decision as covering the Sprint Only Claims is flawed [as a] retroactive expansion of appellate jurisdiction.”

Amgen Inc. v. Sandoz Inc. (Fed. Cir. 2019)

Amgen sued Sandoz for infringing its U.S. Patents 6,162,427 and 8,940,878. Both patents relate to Amgen’s biologic products (filgrastim and pefilgrastim) used as treatments for neutropenia. The lawsuit here is unique because it was filed under Biologics Price Competition and Innovation Act (“BPCIA”).  As an add-on to Hatch-Waxman, the BPCIA defines submission of an FDA biosimilar application (aBLA) as a form of patent infringement.  See 35 U.S.C. § 271(e)(2)(C) (defining submission of an aBLA as an act of patent infringement).

The ‘472 patent claims a “method of treating a disease” by giving a patient Filgrastim/Pegfilgrastim prior to chemotherapy in order to stimulate stem-cell growth.   After treatment with Filgrastim, the claims require “administering to the patient a disease treating-effective amount of at least one chemotherapeutic agent.”  The idea here appears to be that the Filgrastim will stimulate stem-cell growth so that stem cells will survive harsh cancer treatment.

In this case, Amgen argued that its “disease treating-effective amount of … chemotherapeutic agent” would not necessary require that the chemotherapy drug treat the underlying disease — rather, Amgen argues that the drug could be used to further mobilize stem cells.  Both the district and appellate courts rejected this claim construction proposal — noting that the focus of the claims is “treating a disease” and construing the claim otherwise does not make sense:

As an initial matter, the preamble of claim 1, as construed, arguably precludes Amgen’s construction. The district court construed the preamble, “[a] method of treating a disease requiring peripheral stem cell transplantation,” as requiring that the stem cell transplant be incorporated as a component of a method of treating an underlying disease, such as cancer, Claim Construction Order, 2016 WL 4137563, at *5–6, and Amgen does not dispute that construction on appeal. The claimed method therefore must be performed to treat an underlying disease. As the claim itself states, the “disease treating-effective amount” of a chemotherapeutic agent does precisely that.

The court suggests here that if Amgen had not wanted to claim treatment of an underlying disease, it should have drafted different claims. “Had Amgen simply wanted to claim a method of mobilizing stem cells, in any context, it could have done so.”

The ‘878 patent is not a method of treatment but instead directed to a multi-step method of preparing purified biologic products.  This begins with growing cells that express the protein of interest and ends with eluting the protein from a separation matrix such as ion exchange resin.

In its claim construction, the district court held that the claims required separate steps of “applying a refold solution”; washing the solution; and eulting the protein.  That construction eliminated infringement since Sandoz process only requires one step — applying the refold solution without washing or eluting.  On appeal, the Federal Circuit argued that Sandoz’ approach is effectively the same — and that its claims should be read as functional requirements rather than actual process steps.

The Federal Circuit sided with the accused infringer — holding that each step in the method is a separate process step that must be done in a particular order.  Most notably, the court noted (1) the fact that the patentee had sequentially listed its steps a-g; and (2) the washing and eluting steps are “consistently described in the specification as separate steps performed by different solutions.”

Doctrine of Equivalents: The claim construction here naturally raises a doctrine of equivalents question, which the Federal Circuit also rejected:

Amgen argues that Sandoz’s one-step, one-solution process is insubstantially different from the claimed three-step, three-solution process because it “achieves the same functions (washing and eluting), in substantially the same way (binding protein preferentially compared to contaminants, and then raising salt concentration to reverse protein binding) to achieve the same result (protein purification).”

The Federal Circuit found, however, that the one-step approach offered by Sandoz, “does not function in the same way as the claimed process.”  In particular, the court focused-in on the notion that doctrine of equivalents is handled on an element-by-element level. Here, since each claim step is a separate step occurring in sequence – it would be improper to say that that a single-step approach is the equivalent. The court explains:

The doctrine of equivalents applies only in exceptional cases and is not “simply the second prong of every infringement charge, regularly available to extend protection beyond the scope of the claims.” Duncan Parking Techs., Inc. v. IPS Grp., Inc., 914 F.3d 1347, 1362 (Fed. Cir. 2019) (“[T]he doctrine of equivalents cannot be used to effectively read out a claim limitation . . . because the public has a right to rely on the language of patent claims.” )

Although I follow the court’s line of thinking on claim construction, but the court’s limit of the DOE to “exceptional cases” seems to be a major step without precedential backing. 

by Dennis Crouch

Few patent litigators would file a lawsuit if the potential payout is less than $1,000,000 — that amount ordinarily does not cover the expected cost of litigation and risk of loss. Except in the most simple cases, copyright litigation can be similarly expensive.  What this means is that it can be difficult to earn a regular ‘living’ independently creating and licensing intellectual property.

A bipartisan group of legislatures are working on a small claims solution and have proposed the CASE Act: Copyright Alternative in Small-Claims Enforcement Act of 2019.

The basics: The statute calls for creation of a “Copyright Claims Board” empowered to decide infringement cases with a limit of $30,000 damage award per case and no injunction (except to enforce a settlement agreement) and no attorney fees (except for bad faith conduct).  Although the Board will be based in DC, hearings will be via the internet with very limited procedural requirements.

I like it in theory, but need to consider implementation aspects.  Small claims IP court in the UK has received a good amount of positive response — three tiers: Small Claims (<£10,000); Smallish Claims (<£500,000); and Everything Else.

Read the Bill: https://www.congress.gov/bill/116th-congress/house-bill/2426/text

Trading Technologies International, Inc. v. IBG LLC, Interactive Brokers, LLC (Fed. Cir. April 19, 2019).  Panel: Moore (author), Mayer, and Linn  Download TTI v IBG (April 18, 2019)

Trading Technologies International, Inc. v. IBG LLC, Interactive Brokers, LLC (Fed. Cir. April 30, 2019), Panel: Moore (author), Clevenger and Wallach.  Download TTI v. IBG (April 30, 2019)

This is a long post since it covers two opinions addressing Covered Business Method (CBM) review for business method claims, plus discussion of two related opinions for good measure.  tl;dr: The Federal Circuit affirmed the PTAB that the claims are subject to CBM review and are directed to ineligible subject matter.  Along the way it clarified some its jurisprudence interpreting the threshold CBM review regulation.

A potential conflict disclosure at the outset: MBHB, which represented Trading Technologies on these appeals, is the primary financial sponsor of PatentlyO.

On to the writeup…

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Background

Both April opinions in TTI v. IBG involve the same procedural posture, the same general subject matter (displaying market information to traders), and the same issues on appeal: whether the claimed inventions are subject to the “technological inventions” exception to CBM review and whether they claim patent eligible subject matter.  In both cases, the PTAB concluded that the patents were subject to CBM review and held the patents directed to patent ineligible subject matter.  Of the two opinions, the court’s April 18, 2019 opinion is meatier on both issues, so I’ll mainly focus that one.

The two April opinions also provide a counterpoint to the court’s February nonprecedential opinion involving the same parties, the same area of technology, the same procedural posture (appeal from Covered Business Method review decisions by the PTAB), and for some of the patents, the same outcome at the PTAB: lack of subject matter eligibility.   See TTI v. IBG (Fed. Cir. Feb 13, 2019) (nonprecedential).  Writing per curiam, the panel in the February opinion (Judges Lourie, Moore and Reyna) held the patents were for “technological inventions,” and thus were not properly subject to CBM review.  In the two April opinions, overlapping panels (Judges Moore, Mayer and Linn in one and Judges Moore, Clevenger and Wallach in the other) reached the opposite conclusion on different sets of GUI patents.

“Patents for Technological Inventions”

A threshold question for CBM review is whether the patents-in-suit are “patents for technological inventions.   Generally, CBM review is available “a patent that claims 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…”  America Invents Act, § 18(a)(1)(E).  However, this mechanism comes with an important caveat: “…except that this term does not include patents for technological inventions.”  Id.

The USPTO regulation implementing the “technological invention” exception states that:

In determining whether a patent is for a technological invention solely for purposes of the Transitional Program for Covered Business Methods (section 42.301(a)), the following will be considered on a case-by-case basis: whether the claimed subject matter as a whole recites a technological feature that is novel and unobvious over the prior art; and solves a technical problem using a technical solution.

37 C.F.R. § 42.301(b). In Versata v. SAP, 793 F.3d 1306 (Fed. Cir. 2015), the Federal Circuit criticized the regulation while offering a sliver of guidance.  “In short, neither the statute’s punt to the USPTO nor the agency’s lateral of the ball offer anything very useful in understanding the meaning of the term ‘technological invention,'” the court wrote, concluding that “we agree with the PTAB that this is not a technical solution but more akin to creating organizational management charts.”  Id. at 1326, 1327.  

In a subsequent opinion, the court clarified the regulation as involving a “prong”-type analysis: that is, if a patent fails to meet either the “technological feature” or the “solves a technical problem using a technical solution,” it is not a “technological invention.”  See Apple v. Ameranth, 842 F.3d 1229, 1240 (Fed. Cir. 2016) (“We need not address this argument regarding whether the first prong of 37 C.F.R. § 42.301(b) was met, as we affirm the Board’s determination on the second prong of the regulation—that the claimed subject matter as a whole does not solve a technical problem using a technical solution.”)  The court did not elaborate on the meaning of the “solves a technical problem using a technical solution” language.

Meaning of “solves a technical problem using a technical solution”

The two April TTI v. IBG decisions shed additional light on the meaning of the “technical problem” and “technical solution” prong, drawing a distinction between the practice of a financial product as opposed to a technological invention:

“TT argues the inventions addressed technical problems in the way prior art GUI tools were constructed and operated. It claims the ’999 patent addressed problems related to speed, efficiency, and usability, and the ’056 patent. It claims the ’999 patent addressed problems related to speed, efficiency, and usability, and the ’056 patent addressed problems related to intuitiveness, visualization, and efficiency.”

April 18, 2019 Slip Op. at 8-9.  The Federal Circuit held that this is not a technical solution to a technical problem:

“We agree with the Board that the patents relate to the practice of a financial product, not a technological invention.  The specification states that a successful trader anticipates the market to gain an advantage, ’999 patent at 1:20–26, but doing so is difficult because it requires assembling data from various sources and processing that data effectively, id. at 1:51–54. The invention solves this problem by displaying trading information “in an easy to see and interpret graphical format.” Id. at 2:3–6. The specification makes clear that the invention simply displays information that allows a trader to process information more quickly.”

Ultimately, “This invention makes the trader faster and more efficient, not the computer.  This is not a technical solution to a technical problem.”  April 18, 2019 Slip Op. at 9 (emphasis in original).

Additional language in the opinion reinforces this line between business problems and solutions and technological problems and solutions.  In rejecting a challenge to the PTAB’s decision not to consider the testimony of TTI’s expert, the court wrote “Nothing in his declaration asserts that the claimed interface did anything other than present information in a new and more efficient way to traders. Even if the Board had considered this testimony, it could not have reached a different conclusion.”  April 18, 2019 Slip Op. at 10.  Analyzing another GUI patent, the court stated that providing the trader with information in the claimed manner “is focused on improving the trader, not the functioning of the computer.”

“Indeed, the specification acknowledges that the invention ‘can be implemented on any existing or future terminal with the processing capability to perform the functions described,’ id. at 4:4–6, and ‘is not limited by the method used to map the data to the screen display,’ which ‘can be done by any technique known to those skilled in the art,’ id. at 4:64–67.”

The court’s April 30 opinion, reached the same conclusion on a different patent using similar reasoning.  “Merely providing a trader with new or different information in an existing trading screen is not a technical solution to a technical problem,” the court wrote, before repeating the language about the method focusing on “improving the trader, not the functioning of the computer.”   Apr. 30, 2019 Slip Op. at 7.

One final notable aspect of this set of the opinions: By affirming the PTAB on the second prong of the “technological inventions” regulation, the Federal Circuit avoided needing to address TTI’s argument that “Versata set aside the novelty and nonobviousness language of the first prong of the regulation….”  Apr. 18, 2019 Slip Op. at 8.  That issue remains unsettled.

Patent Eligible Subject Matter

The Federal Circuit affirmed the PTAB on the issue of lack of patent eligible subject matter for all the patents-in-suit in a fairly routine review.  The court conducted the Alice two-stage analysis, concluding that the claims were directed to abstract ideas and did not include an inventive concept.  The most interesting aspect of this component of the court’s analysis is the relationship with the 2017 TTI v. CQG nonprecedential opinion discussed below.

Constitutional Challenges: Not preserved by four sentences

The court declined to address TTI’s constitutional challenges, which consisted of “a total of four sentences in each of its opening briefs” based on “a right to a jury under the Seventh Amendment, separation of powers under Article III, the Due Process Clause, and the Taking Clause.”  “Such a conclusory assertion with no analysis to the underlying challenge is insufficient to preserve the issue for appeal.”  Id.

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Relationship with Prior Decisions

As I noted at the outset, these opinions represent a counterpoint to the court’s February nonprecedential opinion, although since the April decisions are precedential and the February one was not, there isn’t direct legal tension.

The February opinion involved a review of a set of CBM review PTAB decisions finding that the both the two patents involved an even earlier opinion, Trading Technologies International, Inc. v. CQG, Inc., 675 F. Appx 1001 (Fed. Cir. 2017) (nonprecedential), and two other patents were not “technological inventions” and therefore were subject to CBM; in the subsequent CBM review, the PTAB held that the two patents from TTI v. CQG were directed to patent eligible subject matter but the other two patents were not.  As with the April decisions, all the patents involved GUI claims.

The Federal Circuit reversed as to the institution decision on all four patents.  For the two patents involved in TTI v. CQG, the Federal Circuit reasoned that because the two patents were directed to patent eligible subject matter, they must be “technological inventions.”  For the other two patents, the Federal Circuit reasoned that “because we see no meaningful difference between the claimed subject matter [of the two sets of patents] for purposes of the technological invention question, the same conclusion applies in those cases as well.  (This is puzzling to me, since the PTAB held that the first set of patents were directed to patent eligible subject matter but the second set were not.)

There’s also the tension between the subject matter eligibility determination in TTI v. CQG and the lack of subject matter eligibility determinations in the two April 2019 TTI v. IBG decisions, but I’ll leave that for others to opine on.  The Federal Circuit itself declined TTI’s invitation to get into the specifics of how its April 2019 decisions relate to the earlier decisions:

“TT argues that because nonprecedential decisions of this court held that other TT patents were for technological inventions or claimed eligible subject matter, we should too. We are not bound by non-precedential decisions at all, much less ones to different patents, different specifications, or different claims. Each panel must evaluate the claims presented to it. Eligibility depends on what is claimed, not all that is disclosed in the specification.”

April 18, 2019 Slip Op. at 19.