August 2012

Micro-Entity Status: Can We All Qualify?

Patent,

On his blog, Mike Kondoudis highlights an important point regarding fees. Once an applicant properly establishes small entity status the small entity fees can continue to be paid until the issue fee is due (even if actual status changes). 37 CFR § 1.27(g)(1). However, in the proposed micro-entity rules, the USPTO has proposed that the micro entity status must be repeatedly established throughout prosecution (except for University applicants). In its response to the proposed rules, the AIPLA argues that this process makes the micro-entity status overly confusing and burdensome. "AIPLA's overall recommendation is to simplify the procedures created by the rules."

In a major giveaway to universities, the America Invents Act includes a provision that allows US Universities to take advantage of the 75% reduction in fees offered by the micro entity status. Independent inventor and author Raoul Drapeau wrote to the PTO with the following response: [This] is another sad example of how large organizations have influenced rulemaking to suit their own ends, to the disadvantage of small inventors. How could an institution of higher learning under any interpretation be considered a small – much less a micro-entity." An ongoing question regarding the micro-entity fees is whether university IP holding companies (such as WARF) and university-esque entities (such as Scripps) will receive the reduction in fee status.

Major Loophole: In an e-mail to the USPTO, well known patent attorney Rick Neifeld highlighted a major potential loophole in the statute that would allow virtually any patent applicant to take advantage of the micro entity status by licensing the invention to a US university. The issue stems from the language of newly added 35 U.S.C. 123(d)(2) that allows patent applicants to qualify for micro-entity fees if the subject applicant is licensed to (or under obligation to license to) a US university. The statute:

(d) INSTITUTIONS OF HIGHER EDUCATION.–For purposes of this section, a micro entity shall include an applicant who certifies that—

… (2) the applicant has assigned, granted, conveyed, or is under an obligation by contract or law, to assign, grant, or convey, a license or other ownership interest in the particular applications to such an institution of higher education [as defined in section 101(a) of the Higher Education Act of 1965 (20 U.S.C. 1001(a))].

Since US universities are – for the most part – non-practicing entities, granting a limited license to a university would have little negative impact and would open the possibility of qualifying for a 75% fee reduction.

In its proposed rules, the USPTO has offered to close the loophole with a requirement that anyone claiming micro-entity status must also qualify for small entity status. In most situations, the USPTO would not have the authority to make such a dramatic change in the law. However, the new Section 123(e) gives the USPTO Director authority "in the Director's discretion, [to] impose income limits, annual filing limits, or other limits on who may qualify as a micro entity pursuant to this section." Of course, it is quite possible that the USPTO's broad limit set here actually surpasses its discretion. In that case, the rule would be struck-down as in Tafas v. Dudas. Neifeld suggests a more narrow rule that would block micro-entity claims in cases where the university-license was created in order to take advantage of the micro-entity status.

Guest Post: Federal Circuit Continues Split on Scope of 271(e)(1)

Patent,

The following is a reprint from the Orange Book Blog and was written by my former office-mate Aaron Barkoff.  Aaron is an IP litigator at McAndrews in Chicago –  Dennis Crouch

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by Aaron Barkoff

Momenta Pharms. v. Amphastar Pharms., No. 2012-1062 (Fed. Cir.)

Last year, in Classen v. Biogen IDEC, a three-judge panel of the Federal Circuit held that the safe harbor of Section 271(e)(1) "does not apply to information that may be routinely reported to the FDA, long after marketing approval has been obtained."  The majority opinion was written by Judge Newman, with Chief Judge Rader concurring and providing additional views, and Judge Moore dissenting.  A petition for certiorari in the case is currently pending at the Supreme Court, and the Court recently asked the Solicitor General's office to weigh in with its views.

Last Friday, in Momenta v. Amphastar, a case between two manufacturers of generic Lovenox (enoxaparin), a slightly different three-judge panel of the Federal Circuit held that the safe harbor does apply to certain post-approval activities.  In the case, Judge Moore wrote the majority opinion, joined by Judge Dyk, and Chief Judge Rader wrote a blistering 29-page dissent.  The decisions in the two cases do not seem entirely consistent with each other, which likely raises the odds that the Supreme Court will agree to hear the Classen case.

Momenta is the assignee of U.S. Patent No. 7,575,886, which generally relates "to methods for analyzing heterogeneous populations of sulfated polysaccharides, e.g. heparin [and] . . . LMWH [low molecular weight heparin–e.g., enoxaparin]."  Two days after Amphastar received final FDA approval to market its generic enoxaparin (and more than a year after Momenta received its own approval), Momenta filed suit against Amphastar, accusing Amphastar of "manufacturing generic enoxaparin for commercial sale" and performing "in their process for manufacturing batches of enoxaparin" an analytical method that infringes the '886 patent.  According to the majority opinion, Momenta also alleged that this infringing testing was necessary to "satisfy the FDA's requirements."

The district court granted Momenta a preliminary injunction, concluding that Amphastar's testing falls outside the scope of the safe harbor under Section 271(e)(1):  "although the safe harbor provision permits otherwise infringing activity that is conducted to obtain regulatory approval of a product, it does not permit a generic manufacturer to continue in that otherwise infringing activity after obtaining approval."  Amphastar appealed, contending that the district court adopted an overly restrictive view of the safe harbor.

The Federal Circuit majority opinion began by addressing Momenta's "contention that the information in question was not 'submitted' to the FDA, but rather was retained by the ANDA holder."  Here, the majority concluded that "the fact that the FDA does not in most cases actually inspect [Amphastar's manufacturing test records] does not change the fact that they are for the development and submission of information under a Federal law."  The majority cited the Supreme Court's Merck v. Integra decision for "holding that uses which are not ultimately included in a submission to the FDA are nonetheless exempted by the safe harbor."

The majority then turned to whether Amphastar's submissions are protected by the safe harbor.  Here, the majority took pains to distinguish Classen:

At issue in Classen were [post-marketing] studies to evaluate the association between the timing of childhood vaccinations and the risk of developing certain immune-mediated disorders.  The studies themselves were not mandated by the FDA, but any vaccine license holder was required to report to the FDA "adverse experience information," such as adverse side effects, it acquired as a result of vaccine studies.  We found that the studies conducted by the vaccine license holder according to patented methods were not insulated by the safe harbor because the studies did not facilitate marketing a generic drug by "expediting development of information for regulatory approval."  We, of course, are bound by the Classen decision unless it is overruled en banc or by the Supreme Court.  Accordingly, the scope of the safe harbor provision does not extend to "information that may be routinely reported to the FDA, long after marketing approval has been obtained."

This case, however, fits well within Classen because the information submitted is necessary both to the continued approval of the ANDA and to the ability to market the generic drug.  Here, the submissions are not "routine submissions" to the FDA, but instead are submissions that are required to maintain FDA approval.  . . .  Failure to comply with these requirements could result in suspension or revocation of Amphastar's ANDA approval to market the drug.

We also note that, unlike in Classen where the patented studies performed were not mandated by the FDA, the information here is not generated voluntarily by the manufacturer but is generated by FDA requirements the manufacturer is obligated under penalty of law to follow.  Under such circumstances, the information can be said to have been gathered solely for submission to the FDA and not, as in Classen, primarily for non-FDA purposes.  While Momenta urges us to adopt the pre-/post-approval distinction used by the district court, we cannot:  Classen did not turn on this artificial distinction, and the plain language of the statute is not restricted to pre-approval activities.

Unlike Classen, where the allegedly infringing activity "may" have eventually led to an FDA submission, there is no dispute in this case that Amphastar's allegedly infringing activities are carried out to "satisfy the FDA's requirements."

In a strongly-worded dissent, Chief Judge Rader repeatedly refers to Amphastar as a "trespasser" and "infringer."  He traces the legislative history of Section 271(e)(1)–which is curious given that the Supreme Court has twice minimized the legislative history and based its decisions instead on the plain (and broad) language of the statute.  And he takes great exception to the majority opinion's basis for distinguishing Classen.  Finally, he claims that the majority's "interpretation of 271(e)(1) would essentially render manufacturing method patents worthless."  While this is an exaggeration, the Supreme Court might reply:  "that is a problem for Congress to fix, if they so choose."

Where the scope of the 271(e)(1) safe harbor ends up matters a great deal, particularly as we approach the era of biosimilar patent litigation.  Like enoxaparin, biologics are complex molecules and thus analytical-method patents figure to be in the patent portfolios protecting them.  The sooner the courts can agree on the scope of the safe harbor, the better for everyone.

Apple wins $1.05 billion verdict

Patent

By Dennis Crouch

Apple v. Samsung (N.D.Cal 2012)

The jury must have read my recent post on Monsanto's $1b verdict and wanted to do one better – awarding Apple $1.05 billion in patent infringement damages.

Apple has won its patent case against Samsung and the nine-member jury has awarded $1.05 billion to the iManufacturer. The jury has also rejected Samsung's countersuit – finding the Samsung patents not-infringed.

Samsung's infringement is identified as "willful" – opening the door to potential punitive damages against Samsung. In patent cases, the judge (here, Judge Koh) is given the responsibility of determining whether to award punitive damages based upon a set of factors outlined in the law. In this case, the statute would limit potential patent damages to three-times the damages calculated by the jury. (The trade dress damages are not so limited).

Apple has also asked for an injunction to stop Samsung's ongoing infringement. However, US patent law places the decision on injunctive relief in the hands of the district court judge. The briefing on injunctive relief will take several weeks and Judge Koh has announced a September 20 hearing date. Judges have discretion to grant/deny injunctive relief based upon the four "eBay factors" defined by the US Supreme Court in 2006. When granting injunctive relief, the judge also has discretion to shape the relief as she sees fit. Some courts have issued broad injunctions that essentially say "stop infringing the patent" others issue much more narrow orders directed only toward the particular products that are adjudged to infringe. The reality is that Samsung has been planning for the likelihood of injunctive relief and is surely ready to stop selling any of the infringing products and replace those products with ones that at least have not yet been adjudged as infringing. Apple has another lawsuit pending against Samsung focusing on Samsung's newer handheld devices.

If an injunction is issued, a big question is whether relief will be stayed pending appeal. An adjudged infringer generally has no right to continue infringing while the case is on appeal. However, courts will stay injunctive relief when the stay prevents great potential harm and/or the appellant has a strong case on appeal. Under the Federal Rules of Civil Procedure, Apple will NOT receive the $1 billion damages until after the appeal is complete. However, Samsung would be required to post a "supersedeas bond" that may be to be set by the court, but will certainly be several hundred million dollars. During the appeal or any other delay in payment, the damages will collect interest.

Next Steps: Samsung has two basic shots at overturning the jury verdict. First, the company can file a motion for judgment against the verdict (JNOV) arguing that the jury verdict goes against the weight of the evidence. Although I do not have specific numbers, it is not uncommon for judges to at least partially reject a jury verdict in complex cases such as this. Based upon what I have read of the case, I believe that Judge Koh is unlikely to alter the jury verdict. Anyone researching this point should consider Judge Koh's history of JNOV motions. If Samsung's pleas to the court fail, the company can appeal to the Court of Appeals for the Federal Circuit. In that appeal, the odds are also with Apple. On this note, Samsung has announced that it will follow my strategy outlined above. In a press release, the company wrote "This is not the final word in this case or in battles being waged in courts and tribunals around the world, some of which have already rejected many of Apple's claims."

Notes:

Patently-O Bits and Bytes by Dennis Crouch

Patent
  • Professor TJ Chiang is blogging on PrawfsBlawg. Topics include: Mossoff’s Trespass Fallacy; The Supreme Court’s NEW patent law textualism; and The Paradox of Patents.
  • As we await the verdict, read the 20-page jury form for Apple v. Samsung: [Link]. In the end, the jury is deciding infringement of one-claim from each of three different utility patents; four different design patents; a claim to both registered and unregistered trade dress; breach of contract and monopolization. Samsung’s countersuit includes five utility patents.
  • I’ll be speaking at the IPO annual meeting on Sept 10 in San Antonio along with my former boss Paul Berghoff – see you there.

Is Patentable Subject Matter a Statutory Defense?

Ethics

Over in the main site, there's a post by Jason Rantanen about Whiteserve v. Computer Packages, here. He points out that Judge Mayer, sua sponte, would have held some claims invalid for lack of patentable subject matter.  

There's an argument that this is not a validity defense, which I find interesting.  Briefly, we're dealing with a statute, not common law, and so the statute matters. Under the statute, there are specifically enumerated defenses.  See Aristrocrat Tech. v. Int'l. Game Tech, 543 F.3d 567, 661-63 (Fed. Cir. 2008).  If a statutory requirement is not identified as an invalidity defense, then it's not.  Id.

Section 282 lists a number of things as defenses, but lack of patentable subject matter under Section 101 is not expressly listed.  You would have to argue that it's implicit, I guess, in "non-infringement" under 282(1).  But that seems to be a very loose reading of the statute (I wrote a book on statutory interpretation and won't bore you with a lot of the mumbo jumbo).

Wait, you say, it's long been recognized as a defense.  Maybe, but a lot of statutes are read wrongly for a long time.  E.g., Central Bank of Denver v. First Interstate Bank of Denver, 511 U.S. 164, 177, 191 (1994) (overruling 60 years of judicial decisions authorizing a statutory cause of action on the ground that Congress in fact had not authorized it).

What's the ethics angle in this?  Heck, I don't know, except that under our system, the statute matters.  Someone explain to me how we can get to an invalidity defense under the statutory language, based on 101…?

 

Whitserve v. Computer Packages

Patent,

By Jason Rantanen

Whitserve, LLC v. Computer Packages, Inc. (Fed. Cir. 2012) Download 11-1206-1261
Panel: Prost, Mayer (dissenting), O'Malley (majority author)

Much of this opinion deals with relatively typical appeal issues of infringement, anticipation, and damages.  Two issues are worth highlighting, however.

Prove Every Claim Element: During the district court proceedings, CPi had focused its anticipation case on claim 10 of Patent No. 6,981,007, and the Federal Circuit agreed that claim 10 was indeed anticipated.  However, the CAFC also concluded that CPi had failed to present detailed evidence explaining how each claim element of the remaining claims was discussed in the prior art, and thus affirmed the jury verdict of no anticipation as to those claims.  The moral of this story? In the absence of a stipulation that the validity of all the claims will rise and fall on a representative claim, patent challengers should make sure to present detailed evidence on every element of every claim they are challenging when advancing one claim as a representative claim.  Here, CPi had presented cursory evidence, at best, asking its expert only "are all the elements of those claims disclosed in the Schrader patent?” to which its expert replied “Yes, they are.”

Patentable Subject Matter: Writing in dissent, Judge Mayer would have sua sponte found three of the asserted patents invalid due to lack of patentable subject matter.  "Because the WhitServe patents simply describe a basic and widely-understood concept—that it is useful to provide people with reminders of important due dates and deadlines—and then apply that concept using conventional computer technology and the Internet, they fail to meet section 101’s subject matter eligibility requirements."   Slip Op. at 51.  This issue, in Judge Mayer's view, was appropriate for the court to take up despite not having been specifically raised by the parties on appeal because there were significant changes in the law since the trial court's decision rejecting CPi's section 101 argument, namely, Mayo v. Prometheus, 132 S. Ct. 1289, 1303 (2012). 

Claim 1 of Patent No. 5,895,468, which is representative of these patent claims, is below.

A device for automatically delivering professional services to a client comprising:
a computer;
a database containing a plurality of client reminders, each of the client reminders comprising a date field having a value attributed thereto;
software executing on said computer for automatically querying said database by the values attributed to each client reminder date field to retrieve a client reminder;
software executing on said computer for automatically generating a client response form based on the retrieved client reminder;
a communication link between said computer and the Internet;
software executing on said computer for automatically transmitting the client response form to the client through said communication link; and,
software executing on said computer for automatically receiving a reply to the response form from the client through said communication link.

Edit: The post should have read "present detailed evidence," not "prevent detailed evidence."  Patent challengers certainly don't want to prevent evidence of patent invalidity! – Jason

A new highest patent court for Europe? Not as long as the Court of Justice of the EU is here

Patent,

This guest post is by Angelos Dimopoulos, Assistant Professor at Tilburg Law School and Petroula Vantsiouri, Doctoral Candidate at the University of Cambridge, Faculty of Law. I invited the pair to write this post to help explain how the new pan-European patent court might fit within the current EU structure (that already includes the EU Court of Justice. – DC

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Any practitioner who has been involved in patent litigation in the European Union (EU) is well aware of the inconsistencies in the Member States patent law and the differences among national litigation systems. Disturbingly often the same case is litigated in several jurisdictions, under different procedural and evidentiary rules with uncertain timing of outcomes. In that respect, it comes as no surprise that the recent initiatives regarding the creation of a European patent with unitary effect (EPUE) and a ‘Unified Patent Court‘ (UPC) are currently the hottest IP topics in Europe. In short, the EU intends to introduce a EU-law based patent right that will be valid throughout the territory of 25 of the 27 EU Member States (Italy and Spain remaining outside) and a single patent court at the European level with exclusive jurisdiction as regards infringement and revocation proceedings, covering the same territory.

The UK government and a number of patent holders are lobbying for limiting the role that the Court of Justice (CJEU), the highest court in the EU in matters of EU law, will play in patent litigation in Europe. In our view this is simply wrong. In our recent paper called “Of TRIPS and traps: The interpretative jurisdiction of Court of Justice of the EU over patent law“, we provide two main arguments in support of this claim. First, we argue that regardless of the final wording or the adoption of the proposed EU legislation, the Court of Justice can acquire a stronger role in the application of patent law by using its interpretative jurisdiction over the patent provisions of the TRIPS Agreement. Secondly, we argue that this role is a significant tool in the process of establishing a complete and uniform framework for patent protection in the EU.

So far the CJEU has been hesitant to apply and interpret the TRIPS patent provisions. In a series of cases concerning the TRIPS Agreement, as they were crystallised in Merck Genericos, the CJEU clarified that the interpretation of the substantive patent provisions of the TRIPS Agreement lie outside its jurisdiction. This means that up to now Member States can decide according to their national laws how to interpret the TRIPS provisions on patents. However, after the entry into force of the Lisbon Treaty (which amended the constitutional charter of the EU in 2009) Merck Genericos is no longer good law. Article 207 of the Treaty on the Functioning of the European Union (TFEU) vests the EU with exclusive competence over commercial aspects of IP and brings the TRIPS agreement within the scope of EU law. In that respect, the CJEU has now acquired significant powers to determine whether national (and in the future Union) patent rules are interpreted consistently with the TRIPS agreement.

This has significant implications for the development of patent rules in the EU. Currently, patent law in the EU is characterized by a lack of harmonization, although there are some uniform rules. All 27 Member States have acceded to the European Patent Convention (EPC), which established the European Patent Organisation (EPO) and a system of law for granting patents for inventions. Thus, national laws of EU Member States are de facto harmonized in the field of patentability and validity but only as regards the grant of patents. Issues of validity and infringement after the patent grant are matters for national law and national courts. But even in the fields covered by the EPC, uniformity is not always present. In many instances the EPO and national authorities interpret the EPC in diverging ways. Many national authorities do not take each other’s case law into consideration, and even if they do, differences in legal traditions, policy choices or practicalities can lead to different outcomes.

The proposed EU patent with unitary effect and the proposed Unified Patent Court cannot change all that. The proposed legislation does not guarantee the establishment of truly uniform rules. As the proposals now stand, substantive issues (prior user rights, assignments, voluntary and compulsory licensees and government use) are left outside the scope of the proposed Unitary Patent Protection. Moreover, if adopted, the proposals will lead to four different types of patents within the EU. Finally, with Spain and Italy not participating in these projects, the EU will be partitioned in three territories.    

So, how can the Court of Justice fix that?

First, although the TRIPS agreement is very broad as regards the subject matter of patent protection, it contains specific rules on prior users’ rights and exceptions, including in particular compulsory licenses, which are subject matters left outside the scope of the proposed regulation. Article 1 TRIPS requires that WTO members “give effect” to its provisions, which signifies that a WTO member should take all reasonable measures to ensure consistency between domestic law and the agreement. So, the CJEU can use its interpretative jurisdiction to establish common minimum rules with regard to the subject matters that could be left outside the scope of harmonization.

Secondly, the Court’s interpretative jurisdiction can result in the establishment of minimum, uniform standards of protection for the different types of patents. In its previous caselaw (Hermes and Dior) the Court held that “where a provision can apply both to situations falling within the scope of national law and to situations falling within the scope of [Union] law, it is clearly in the [Union] interest that, in order to forestall future differences of interpretation, that provision should be interpreted uniformly, whatever the circumstances in which it is to apply.” Considering that the regulation on European Patents with Unitary Effect will be part of Union law, the Court of Justice can employ the TRIPS agreement in order to determine the standards of protection under national and EPO-granted patents by reference to the standards of protection of European Patents with Unitary Effect, so as to ensure uniform implementation of the TRIPS agreement in the EU.

Thirdly, the interpretative jurisdiction of the Court can mitigate the danger that arises from the existence of parallel adjudication regimes for patent protection. By allowing the CJEU to determine whether national courts abide by the TRIPS when they adjudicate patent infringement cases, the CJEU can act as the single, ultimate judicial authority in the EU, ensuring coherence and consistency in the interpretation of the different regimes of patent infringement rules.

In short, although it cannot contribute to the reduction of litigation costs, at least initially, the CJEU’s interpretative jurisdiction over TRIPS provisions can promote legal certainty, and the establishment of uniform and comprehensive patent protection in the EU that would be attractive to the industry and conducive to technological progress. Nevertheless, the power to interpret the TRIPS is not a panacea. It does not result in the establishment of uniform substantive rules, as the TRIPS is a minimum standards agreement, while its success depends on the number and subject matter of the actual cases that will reach its jurisdiction under the preliminary reference procedure.

Maintenance Fee Reminders as Indicia of On-Going Attorney-Client Relationships

Ethics

There's a split in the law (even in the USPTO) on whether a lawyer who calendars or sends maintenance fee reminders creates an on-going attorney-client relationship with the recipient/patent owner.  This is highly significant since, for example, a lawyer who represents a client cannot be adverse to it, at all, and "adversity" has a very unwieldy definition in all areas, but especially patent practice.  (In addition, in some states an on-going attorney-client relationship tolls the running of the statute of limitations.)

So, what do you think of this language, for an engagement letter, say, to help avoid misunderstanding?

"If a patent is granted to you as a result of our prosecution, you must periodically pay maintenance fees or the patent will lapse, perhaps rendering it worthless.  Generally, fees will be due 3½, 7½, and 11½ years after the date of issuance.  We will send to your last known address maintenance fee reminders as a service, even though our attorney-client relationship has concluded, but only if you request us in writing to do so when we forward any patent to you.  If you do not ask us in writing to do so, we strongly suggest that you either hire a commercial service to do this for you, or place reminders of maintenance fees in more than one calendaring system.  Failure to docket maintenance fees can result in the loss of patent rights."

Adversity in Patent Litigation

Ethics

I just finished (for now) the updated chapter in the second edition of our book on ethical issues in patent prosecution that covers conflicts of interest in patent prosecution.  There's very little authority out there, but lots of lawsuits and ethics "experts" with different opinions about what is, and is not, adverse in patent prosecution, so this topic is always interesting.

In updating it, I enjoyed reading the ITC decision denying Google's motion to disqualify Pepper Hamilton. In the Matter of Certain Portable Communication Devices, Inv. No. 337-TA-827 (Order No. 7 Feb. 13, 2012).  (Disclosure: I was an expert retained by Pepper Hamilton to provide an opinion.)  The case is interesting and provides some light on what might be "adverse" in patent litigation and, in my view, also in patent prosecution.  The tone of the ALJ's decision also offers, I think, important lessons on how to approach a motion to disqualify: if you're accusing the side of being unethical, act with very clean hands.

In that case, Pepper Hamilton was prosecuting a few patent applications for Google. It undertook to represent a patentee, Digitude, in an exclusion proceeding before the ITC, seeking an order preventing importation of certain cell phones and other devices. 

Google was not a defendant, and its products and services were not accused of infringing the patent involved in the ITC proceeding. Nonetheless, the accused products used Google’s Android software, and that software allegedly satisfied one element of a claim-in-suit.  Google intervened in the proceeding, contending that Pepper Hamilton was adverse to it, because Google was a member of a consortium (the “Open Handset Alliance”) that provided, free of charge, the Android software as an open source product to the device makers.  Further, the Open Handset Alliance specifically disclaimed any warranty of non-infringement when doing so.

The staff recommended denying the motion to disqualify, and the ALJ did so. The ALJ rejected several arguments presented by Google to establish adversity despite the usual indicia under the burden of proof required in the ITC:

Based on the foregoing, I find that Google has not clearly demonstrated that Pepper Hamilton's representation of Digitude is "directly adverse" to Google. Any finding of a violation of Section 337 in this investigation will not impact Google's legal interests because of the wording of the Apache 2.0 license under which Android is licensed [which disclaimed the warranty of non-infringement]. Moreover, I find that Google did not provide the full factual background when it asserted that Android is a "Google product," as the evidence establishes that Android is an open source project run through the Open Handset Alliance, whereby the software is provided at no cost and everyone is invited to contribute. Google asserts that Pepper Hamilton's representation of Digitude is adverse to Google's business interests as well. Google offers no evidence regarding how Google's business interests will be harmed through this litigation. Instead, Google offers a declaration from its in-house Litigation Counsel that makes conclusory assertions such as "Google has a strong interest in preserving the Respondents' continued importation of devices that incorporate Google's Android technology," and, to the extent that Digitude's infringement claims are directed to Android, "Google's legal and business interests are harmed." Such unsupported assertions do not demonstrate that Google' s business interests will be harmed if Digitude obtains relief against the respondents' Android-based products. Google argues that respondents in this investigation who make products that do not run the Android operating system may assert Google's patents or technology as prior art that invalidates Digitude's patents, thereby requiring Pepper Hamilton to attack Google's prior art patents or technology. Google offers no evidence that any Google patent or technology is being asserted as prior art in this investigation, making Google's argument pure speculation. The mere possibility that Google prior art will be relied upon in this investigation does not give rise to a Rule 1. 7 violation.

Google raises a concern regarding Google's possible involvement in this investigation as a third party. Pepper Hamilton has assured Google that it will not seek any third party discovery from Google in the current investigation.  Pepper Hamilton has also assured Google that if another party seeks third party discovery from Google and a deposition takes place, no Pepper Hamilton attorney will examine a Google witness. (ld) I fmd that these assurances are sufficient, and that Pepper Hamilton will be held to these promises, and the other promises included in Mr. Zemaitis' January 20, 2012letter. (ld) Pepper Hamilton shall have no involvement in any Google third party discovery in this investigation. This prevents any potential direct adversity from arising.

Google also raises a concern regarding the confidentiality of its information. Google has not offered any evidence that its confidential information has been viewed or used by Pepper Hamilton attorneys representing Digitude. Pepper Hamilton has already established an ethical screen. With this ethical screen in place, Pepper Hamilton attorneys working on this investigation on behalf of Digitude cannot access Google's confidential information, and Pepper Hamilton attorneys working on behalf of Google cannot access confidential information in the current investigation. Digitude offered declarations from the Pepper Hamilton attorneys who have made an appearance in this investigation, with each declaration stating that the attorney has not, inter alia, performed legal work for Google or accessed any Google confidential information while at Pepper Hamilton. Moreover, there is a physical separation of any hard copy documents, as Pepper Hamilton's work for Google takes place in its Pennsylvania and Delaware offices, while Pepper Hamilton's work for Digitude takes place in its Massachusetts and Washington, DC offices.  I find that the actions taken by Pepper Hamilton serve as a reasonable precaution to keep the confidential information of Google and Digitude separate. Pepper Hamilton shall ensure that these safeguards are kept in place.

 In sum, I find that Google has not met its heavy burden in demonstrating that Pepper Hamilton should be disqualified from representing Digitude in this investigation.

 

Judge Alsup Orders Further Disclosures from Google in Google v. Oracle

Ethics

Judge Alsup held Google’s disclosures were insufficient, and clarified in a way that he suggested might result in further disclosures by Oracle. He explained: “the order was designed to bring to light authors whose statements about the issues in the case might have been influenced by the receipt of money.” He also wrote: “listing all commenters known by Google to have received payments as consultants, contractors, vendors, or employees. As for organizations receiving money, they need not be listed unless one of its employees was a commenter.”

My impression from going through all these orders is that the Judge has seen some smoke, and believes there is fire. Whether that fire is something the judiciary should be concerned with is itself an interesting question.  Again, I analogize it to sponsored science, where disclosure by a scientist that he has been paid by X corporation to conduct a study on Y compound, which is made by X corporation, is something that should be disclosed. Arguably, the case is stronger in instances of “soft” information like legal analysis, since, in theory, a scientific article should disclose enough that it could be judged on its own.

The order is here.

 There is an article here.

Analyzing the Role of NPEs in the Patent System

Patent, , , ,

Guest Post by David L. Schwartz, Associate Professor at Chicago-Kent College of Law and Jay P. Kesan, Professor and H. Ross & Helen Workman Research Scholar, University of Illinois College of Law

Understanding the role of non-practicing entities (or "NPEs" for short) in patent litigation is important. For one reason, patent litigators appear to be polarizing into a plaintiffs' bar and a defense bar. This polarization in lawyers is new to patent litigation, but has existed for many years in other areas of the law, such as medical malpractice, products liability, and labor law. In addition to the lawyers, certain industries have experienced more infringement allegations by NPEs, which have created rifts in many debates about patent reform. The topic of NPEs in patent litigation – their costs and benefits – has been featured prominently in the press, including extensive coverage of a study reporting that the "direct cost" of NPEs was $29 billion in 2011.

We recently wrote a short paper called Analyzing the Role of Non-Practicing Entities in the Patent System, which attempts to set forth a coherent way to conceptualize NPEs.

Before we can meaningfully study or even discuss NPEs, it is important to precisely define what is an NPE. Unfortunately, there is very little agreement on this point. Technically, individual inventors and universities are non-practicing entities. However, they appear very different from each other, and they are also different from start-up companies that have unsuccessfully attempted to commercialize their patented technologies. In addition, the term NPE is often used to refer to both small patent holding companies and large patent aggregators who purchase portfolios of patents from inventors and others for the primary purpose of enforcement. Any credible study of NPEs should distinguish among these different constituents and report empirical information separately.

Beyond the definitional issue, numerous arguments have been offered about the positive and negative aspects of the rise of NPEs in patent litigation. We discuss below several of these arguments, and what the existing empirical evidence suggests.

1. Criticisms of NPEs:

One common criticism of NPEs (however that term is defined) is that they initiate patent infringement lawsuits seeking to enforce patents of dubious quality or with questionable infringement claims, and then settling for amounts far less than the defendants' litigation costs. The story is that NPEs take strategic advantage of the notoriously high cost of patent litigation, which requires several million dollars in attorneys' fees to litigate through the close of discovery.

There is a little firm empirical evidence supporting this scenario of the combination of dubious patent assertions with low settlement demands. There is evidence that NPEs settle more quickly compared to other patent holders, which could indicate the possibility of nuisance settlements. But there is also evidence that the patents asserted by NPEs are similar to patents asserted by practicing entities. There is some evidence that the most litigious NPEs lose more often when the cases are taken to a final judgment, but like other types of complex civil litigation, the vast majority of patent cases settle before judgment.

If widespread opportunistic conduct by NPEs is in fact true, then we need less expensive ways to invalidate patents (e.g., cheaper post-grant review and inter partes review) and to resolve infringement actions (e.g., with a small claims court for cases with less than $3 million in damages or with early ADR).

But before we conclude that such widespread opportunistic conduct is occurring, we need better data on the merits of NPE patent cases, settlement amounts in those cases, the length of time they last, and the amount of attorneys' fees paid by defendants and NPEs to get a true picture of what the reality is. Recently, James Bessen and Michael Meurer from Boston University released a highly publicized study estimating that the direct cost of NPE patent assertions is "substantial, totaling about $29 billion in accrued costs in 2011." We have criticized their methodology and findings, which has been reported on here, here, and here. Briefly, we believe that the $29 billion estimate is likely skewed too high for several reasons. The estimate is based upon a biased sample of NPE defendants. It also includes the settlements, verdicts, and judgments to NPEs as part of the costs, when in reality these are the transfers to patent holders at the very core of the patent system. We find their analysis unsatisfying, and our article offers various suggested improvements to their methodology. Their study also does not consider the merits of the underlying cases.

A second common criticism is that certain types of NPEs – those who are unrelated to the original inventors – pocket a large part of the settlement amounts received and pass little on to the inventors who initially developed the patented technology. We need more data to assess this, but what we currently know appears to point to the opposite conclusion. For instance, Acacia Research Group, perhaps the largest publicly traded NPE, reported that in 2011, it paid more in royalties to inventors than it did to contingent fee attorneys who enforced their patents in litigation.

A third common criticism is that NPEs are not true innovators. Rather, they wait for another to expend resources to commercialize a product with the patented technology and then demand a "tax" on it. We think that existing patent law doctrines can be used to analyze this criticism: Are the asserted patent claims invalid as obvious? Does the accused product embody the asserted claims? Is there some other defense to infringement that has merit? What is the appropriate amount of damages for infringement? And does equity support the entry of an injunction?

2. Benefits of NPEs:

Most agree that university faculty and graduate students are often true innovators. But even NPEs unrelated to the original inventors may provide benefits. This is difficult to empirically assess because nearly all such NPEs are privately-held companies, and there is little publicly available information about these entities. If the concern is that settlement dollars transferred to NPEs are not provided to R&D or inventors, we suggest that private NPEs be surveyed. A survey of NPEs on issues such as litigation costs, settlements, transfers to inventors, and other issues, could be of tremendous value. We do not believe that any such survey has ever been conducted. A survey of NPEs has the additional advantage of exploring both sides of this issue. It could reveal a more complete and balanced picture of patent litigation than what can be obtained from surveying only one side, the accused infringers.

Even NPEs who merely purchase patents with an eye toward enforcement may serve a useful purpose by creating a market for patent rights. They purchase patents from those who do not have the resources or expertise to take their patented technologies to market such as individual inventors. These individual inventors often do not have the resources to hire lawyers that bill by the hour and instead must look for alternate arrangements, such as contingency fee representation or a sale of their portfolios to NPEs. Thus, NPEs create opportunities, perhaps the only opportunities, for non-manufacturing patentees to monetize their patents.

From an economic perspective, many believe that NPEs may serve an important market need. They absorb the risks and uncertainties of patent litigation, and yet may provide an important service permitting non-manufacturing patentees to reap some monetary rewards for their innovations. This potential benefit is premised upon the assumption that the patents are not of dubious quality. With respect to the debate about NPEs, we believe that focusing solely on the costs from and the distributions of funds by NPEs is somewhat beside the point. The better question is whether NPE lawsuits are being brought because the defendants are infringers of a valid patent, or because the defendants are merely easy targets for a nuisance lawsuit. This determination requires looking beyond the identity of the patent holder. Rather, it means we need to evaluate the patents being asserted to determine if there are credible patent claims that are valid, enforceable, and infringed. To the extent changes are needed to the patent system, we suggest focusing on reducing transaction costs (e.g., lawyers' fees) in patent litigation, offering cheaper mechanisms to challenge issued patents (the AIA's post-grant challenges and other administrative procedures for challenging validity appear to be a step in the right direction), and providing cheaper and quicker adjudication through a new small claims court for patent lawsuits, instead of focusing solely on whether the patent holder is a non-practicing entity.

In sum, the debate about NPEs underscores the fundamental point that patent litigation is about whether a valid and enforceable patent claim has been infringed. The more efficiently we can determine this answer in a lawsuit, the better off we will be.

The full article, which includes suggestions for improving the patent system, areas for future study, and criticisms of the study by other academics is available here.

AIA Practice Tips: Using New Inventor Declaration Forms

Patent, ,

The following is a guest post from Carl Oppedahl. Oppedahl is the founder of his self-named, Colorado-based patent law firm. www.oppedahl.com

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On August 14, 2012, USPTO published its new Rules relating to the Oath and Declaration of the inventor. These Rules take effect on Sunday, September 16, 2012 and it is not much of an exaggeration to say that they change everything about the Oath and Declaration of the inventor. USPTO has also posted several new forms on its web site, forms which will be usable starting on September 16, 2012. In this guest post I will talk about two particular forms and the ways that they will make a big difference in your daily patent practice.

We are all familiar with Form PTO/SB/01 and Form PTO/SB/01A, which I call the "long form" declaration and the "short form" declaration. These two forms are to be used for any patent application filed before September 16, 2012. They contain the "magic words" that are required for a declaration that is used in an application filed before September 16, 2012. I call these "old" declarations. When I say an "old" application I mean an application filed before September 16, 2012.

The long form declaration contains all of the bibliographic data, for example the foreign priority information, the mailing address of the inventors, and lots of other things. The short form declaration contains the bare minimum of information and "magic words" permitted by the Statute and the Rules for an "old" application.

This leads us to one of the very big changes in the new Rules. For a new patent application filed on or after September 16, 2012 (which I call a "new" application), the "magic words" and the information content for a declaration are different than before. The new form is PTO/AIA/01. I call this the "new" declaration.

Here is one of the important things to know. If your application is a "new" application, then the declaration has to be a "new" declaration. If your application is an "old" application, then the declaration has to be an "old" declaration.

We all know that under 35 USC § 363, a PCT application designating the United States is a US patent application. This means that if your application is a US national phase of a PCT application, then the way you know whether it is "new" or "old" is by looking at the international filing date.

If you are getting ready to send a blank declaration to an inventor for signature, you need to send the correct one ("old" or "new") depending on the filing date of the application. If you already have a signed declaration in hand and you are thinking about sending it to the USPTO, you need to look at it to see if it is "old" or "new" If it is the wrong kind, then you need to prepare one of the correct kind and get it signed.

Go to the web site of the USPTO and print out the "old" and "new" declarations. What you will see is summarized in this table:

Filing date of application

Before September 16, 2012

On or after September 16, 2012

How many inventor documents are filed?

One declaration with N signatures lines, one signature line for each inventor

One form for each inventor, each with one signature line and one signature

Does the declaration take a position on who the other inventors are?

Yes

No

How many "magic words"?

203

90

Form

PTO/SB/01A

PTO/AIA/01

Citizenship stated in form?

Yes

No

When an inventor cannot be found or refuses to sign?

Rule 47 practice

Form PTO/AIA/02 ("Substitute Statement")

One of the first things you will see is that the new declaration has no place to list any inventors other than the particular inventor who is signing the declaration. Instead, it turns out that the way the USPTO learns who the inventors are in a particular case is by means of an Application Data Sheet.

For an old application, there will be a single declaration form, with places for as many signatures as there are inventors. Each inventor is taking a position as to who the other inventors are. In contrast, for a new application, there are as many declaration forms (Form PTO/AIA/01) as there are inventors, each having only a single signature line for that inventor.

Another thing you will see is that the "magic words" count is far smaller for a new declaration compared with an old one. The magic word count is 90 compared with 203.

The new declaration does not aver that the signer has reviewed and understood the application including the claims. And it does not acknowledge the duty of disclosure. But the new Rules state that anyone signing a declaration must have reviewed and understood the application including the claims. And the new Rules state that the signer must be aware of the duty of disclosure. So you will need to do whatever it takes to ensure that these requirements are satisfied for anyone signing a new declaration.

What happens if an inventor cannot be found or refuses to sign the declaration?

For an old application, the answer is of course the well-known Rule 47 procedure. You assemble one or more statements signed by various persons having knowledge of the pertinent facts, you prepare a Petition, you pay a fee, and then you wait to find out what the USPTO thinks about your papers. Maybe the USPTO grants the Petition, maybe the USPTO asks for more statements or more detailed statements. I've heard stories from practitioners who had to go around as many as three times with the USPTO before the USPTO would grant the Petition.

For a new application, it's all different. You simply fill out Form PTO/AIA/02 and send it in. No fee, no statements, no petition. This form all by itself replaces the inventor's declaration. So for example if you have seven inventors, and two of them refuse to sign and another cannot be found, then you will hand in three Forms PTO/AIA/02, and four signed Forms PTO/AIA/01, and an Application Data Sheet, and Bob's your uncle.

So for some categories of inventor signature problem, the legacy Rule 47 procedure is a thing of the past. Anyone who has suffered through a difficult Rule 47 Petition in the past will be delighted at this change.

Which gets us to the Application Data Sheet (ADS). The ADS with which many of us are familiar is Form PTO/SB/14 ( /media/docs/2012/08/sb0014.pdf ). It is a Best Practice to use this form (which is computer-readable) because it can auto-load its bibliographic data directly into EFS-Web and from there into Palm. This eliminates several possible sources of error when compared with an approach in which USPTO personnel hand-key such information into Palm.

Under the new Rules, the use of a ADS is mandatory except under a small handful of rare fact situations. So you might as well get used to preparing and filing ADSs.

Within the next week or two, USPTO will post the "new" application data sheet for use with "new" patent applications. When this ADS becomes available, it will likewise be a Best Practice to use it, and to e-file it so that it too may auto-load into Palm. The key is to include the computer-readable ADS in the first e-filing submission for a particular patent application. Only then will it auto-load into Palm.

After you have carried out the e-filing submission that contains the ADS (the first e-filing submission for a particular patent application), be sure to open the application in Private PAIR and click on the Publication Review page. You can proofread this page and you can check all of the bibliographic data for accuracy. In the event of some error or omission, you can get started right away on getting it fixed even before the Filing Receipt gets mailed.

Well, there we are. I've told you about one-twentieth of the things that are completely different as a result of USPTO's new rules relating to the oath and declaration. For the rest, you can read the new Rules (/media/docs/2012/08/fr_inventor_oath.pdf ).

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Carl Oppedahl will present a webinar (brochure) about the new Rules on Oath and Declaration on August 30, 2012. Carl has made this posting available as an Epub file which you could load into a Nook or any other Epub reader.

© OPLF 2012

Follow up on: Judge Alsup Orders Google and Oracle to Reveal Relationships with Bloggers, Journalists and Academics

Ethics

The parties made their disclosures. An article about it is here.  Google's list is here and Oracle's is here.

An interesting broader issue arsises from the allegation by Oracle (if true) about Google having a "network" of advisors, and what that might mean for broader issues, beyond this case. Oracle allege a vast network of folks paid to advance Google's IP agenda (pretty much in those words).  In one of my worlds, academic research and writing, no one discloses ties like that.  What if, for example, Google saw my masterful piece on why TheraSense might not be retroactive, and paid me $100,000 to publish it far and wide and further it, since it needed that defense to succeed in a case?  What if I'm just on a retainer to Google, but I'm blogging here on some on-going Google litigation, or a pending appeal?  Shouldn't I disclose that?

Anyhow, if Google wants to pay me a lot of money to write articles, they can, I'd just disclose it.  Hint, hint.

Two Upcoming eSeminars

Patent

For many years, Carl Oppedahl has been a leader in helping the patent world understand how to make the most of the USPTO's electronic filing systems. This fall, Oppedahl has two eSeminars.

  • August 30 – Understand the complexity and simplicity of the new oath/declaration rules that go into effect September 16, 2012. Oppedahl is charging $89 minus a $40 discount for Patently-O readers (coupon code PLAW4) (first 20 coupons). http://www.oppedahl.com/cle/oath/.
  • August 29 – Learn about WIPO's version of Private PAIR (ePCT). Free. http://www.oppedahl.com/cle/epct/.

Libertarians and Patents: Kinsella vs Mossoff

Patent

Libertarian writer and patent attorney Stephen Kinsella has written a critique of Prof. Mossoff's Trespass Fallacy paper.  LINK.  Libertarian thought on intellectual property is somewhat unsettled.  Kinsella is one of the thought leaders of the modern anti-patent libertarians while Mossoff represents the pro-patent side.

One of Kinsella's basic arguments stems from the traditional libertarian support for individual liberties and strong private property rights.  When some third party holds a patent, that patent limits what I can do with my scarce private property as well as my individual freedoms. 

The Case or Controversy in AMP v. PTO

Patent,

By Dennis Crouch

A substantial number of patent lawsuits are declaratory judgment actions that involve a user asking a federal court to rule that it is not liable for patent infringement (either because the user does not infringe or because the patent is invalid/unenforceable). A preliminary issue in these cases is always a determination of whether a sufficient legal dispute exists (a case or controversy) between the parties. Under the U.S. Constitution (as interpreted), a federal court cannot pass judgment on cases that do not meet this threshold. When multiple plaintiffs are present (as in the Myriad case), the court must find at least one plaintiff-defendant relationship that meets this threshold or else the case must be dismissed for lack of standing.

In Myriad, the Federal Circuit ruled that the research of at least one individual (Dr. Ostrer) was hampered by Myriad's patent enforcement activities. Although the court found a controversy in this case, the language that it used to permit the case to continue is quite narrow.

Public Interest Patent Litigation: An important element of the Myriad case is that it has been driven largely by public interest groups operating with an agenda of denuding patents that they see as harmful to public health and fundamental liberties. These parties include the ACLU, PubPat, and the first-named plaintiff, the Association for Molecular Pathology (AMP). Those advocacy groups have no intention of using the patent themselves, but challenging the patent fits within their agenda of protecting the public. In its opinion here, the court holds that those organizations do not have standing in the case.

We … reverse the district court's holding that the various plaintiffs other than Dr. Ostrer have standing to maintain this declaratory judgment action. Simply disagreeing with the existence of a patent on isolated DNA sequences or even suffering an attenuated, non-proximate, effect from the existence of a patent does not meet the Supreme Court's requirement for an adverse legal controversy of sufficient immediacy and reality to warrant the issuance of a declaratory judgment. The various organizational plaintiffs in this suit in particular were not the target of any enforcement action or offered license agreements by Myriad and had made no preparation to undertake potentially infringing activities. They accordingly suffered no injury and thus lack standing to bring this action.

This result obviously makes it more difficult for public interest organizations to take this type of action in the future. However, the court provides a roadmap – simply identify an individual with an actual controversy as the named plaintiff.

Patient / Health Insurance Plaintiffs: Another set of plaintiffs in this case are patients who would like to run the DNA test using an alternative laboratory – either because they want a second opinion or because they want a cheaper test. The court also wrote that those patients likely lack standing to bring a declaratory judgment action in the absence of some affirmative act by the patentee against those defendants.

Certain patients also allege an injury based on their inability to gain access to affordable BRCA genetic testing because of Myriad's patent dominance of such services. While denial of health services can, in certain circumstances, state a judicially cognizable injury, Plaintiffs have not pressed this as an independent ground for standing. Moreover, we fail to see how the inability to afford a patented invention could establish an invasion of a legally protected interest for purposes of standing.

This quote from the court conforms well to the Supreme Court's recent copyright decision Golan v. Holder (2012). In that case, the court wrote that individuals do not have enforceable rights to use the "public domain."

In a sense, it appears that the court here strained to claim jurisdiction over the case, but was careful to attempt to avoid expanding the scope of declaratory judgment jurisdiction in the process.

Gene Patent Debate Continues: Federal Circuit Finds Isolated Human Genes Patentable

Patent, , , ,

By Dennis Crouch

Association for Molecular Pathology (AMP) and ACLU v. USPTO and Myriad Genetics (Fed. Cir. 2012)

On remand from the Supreme Court (GVR), a three-member panel of the Court of Appeals for the Federal Circuit has released its highly anticipated decision in AMP v. Myriad. The key results:

  1. Affirmed: The courts properly have jurisdiction over the declaratory judgment case.
  2. Reversed: Myriad's composition claims to isolated DNAs, including cDNAs fall within the scope of Section 101 patentable subject matter.
  3. Affirmed: Myriad's method claims directed to comparing or analyzing gene sequences are not subject matter eligible.
  4. Reversed: Myriad's method claim to screening potential cancer therapeutics via in vitro changes is subject matter eligible.

This decision largely follows the decision previously released by the same panel in 2011. Each member of the court wrote separate opinions, with the opinion of the court filed by Judge Lourie, Judge Moore concurring in part and Judge Bryson dissenting in part. In dissent, Judge Bryson again employed his leaf analogy – arguing that a gene that was merely isolated from the human body cannot itself be patentable in the same way that a naturally grown leaf does not become patentable simply because it is plucked from its tree. Judge Bryson writes:

[E]xtracting a gene is akin to snapping a leaf from a tree. Like a gene, a leaf has a natural starting and stopping point. It buds during spring from the same place that it breaks off and falls during autumn. Yet prematurely plucking the leaf would not turn it into a human-made invention. That would remain true if there were minor differences between the plucked leaf and the fallen autumn leaf, unless those differences imparted "markedly different characteristics" to the plucked leaf.

The majority (here judges Lourie and Moore) disputed the leaf analogy based upon the apparent technical difficulty of isolating human DNA.

It is also important to dispute the dissent's analogy to snapping a leaf from a tree. With respect, no one could contemplate that snapping a leaf from a tree would be worthy of a patent, whereas isolating genes to provide useful diagnostic tools and medicines is surely what the patent laws are intended to encourage and protect. Snapping a leaf from a tree is a physical separation, easily done by anyone. Creating a new chemical entity is the work of human transformation, requiring skill, knowledge, and effort.

Although it may well be comparatively difficult to isolate DNA, at the time of the invention (and even more so today) the process of isolating human DNA was well known and (once the gene sequence was known) was not something difficult for one skilled in this art. I personally isolated selected portions of DNA (non-human) back in 1992 (before the priority date) as part of the introductory biology course that I took in college. It was easy. The majority's analysis here essentially rejects any notion that the Mayo court would find an invention consisting of a combination of old-technology + newly-discovered-product-of-nature to be subject matter ineligible.

The core of the majority argument regarding the isolated DNA claims is that the process of removing the DNA from the human body necessarily transforms those molecules into something new and different. As Locke might say, the mixture of the naturally occurring DNA with human ingenuity and labor resulted in a new arrangement of matter heretofore never seen. The Judge Lourie writes:

The isolated DNA molecules before us are not found in nature. They are obtained in the laboratory and are man-made, the product of human ingenuity. While they are prepared from products of nature, so is every other composition of matter. All new chemical or biological molecules, whether made by synthesis or decomposition, are made from natural materials. For example, virtually every medicine utilized by today's medical practitioners, and every manufactured plastic product, is either synthesized from natural materials (most often petroleum fractions) or derived from natural plant materials. But, as such, they are different from natural materials, even if they are ultimately derived from them. The same is true of isolated DNA molecules. . . .

While purified natural products thus may or may not qualify for patent under § 101, the isolated DNAs of the present patents constitute an a fortiori situation, where they are not only purified; they are different from the natural products in "name, character, and use." (quoting Chakrabarty).

To be clear, the change in the molecule that the court is discussing is that the isolated DNA molecule is cleaved from the larger chromosomal DNA molecule by enzymatically cutting it off at each end and slightly altering the terminal amino acid groups. In a concurring opinion, Judge Moore agreed that the isolated DNA is patent eligible, but rejected the notion that the chemical difference between the in situ gene (part of the chromosome) and the isolated gene is sufficient to justify the conclusion. Rather, Judge Moore identified the altered chemical along with the new and beneficial utility achieved because of the isolation as dual keys to patent eligibility. (Note – for further study – Lourie's dicta that isolation for new purpose is insufficient).

The point of this rehearing was to consider the impact of Mayo on this case. As suggested by the above paragraph, the Judge Lourie's answer here is basically that Mayo has no impact here. Of importance, the court indicated that the holding in Mayo should be limited to method claims and thus cannot be applicable to Myriad's DNA composition claims.

The principal claims of the patents before us on remand relate to isolated DNA molecules. Mayo does not control the question of patent-eligibility of such claims.

This cabining of Mayo will be the key to any petition for a writ of certiorari. To be fair, when considering the Supreme Court's analysis in Mayo v. Prometheus, the CAFC found that precedent applicable to analysis of the method claims. Of course, the CAFC had already held those method claims ineligible even before Mayo (in its prior decision). Interestingly, even though in dissent, Judge Bryson agreed that the "Supreme Court's recent decision in Mayo Collaborative Services v. Prometheus Laboratories, Inc., 132 S. Ct. 1289, 1293 (2012), does not decide this case." Judge Bryson implicitly agrees that the distinction is based upon claim form – because Mayo "involved method claims." However, he did draw the same analogy that I penned immediately following the Mayo decision – that the discovery of the DNA sequence is the heart of the invention and that the rest of the claim structure is merely window dressing.

In Mayo, which involved method claims, the representative claim involved the steps of administering a drug to a subject, determining a metabolite concentration in the subject's blood, and inferring the need for a change in dosage based on that metabolite concentration. The [Supreme] Court found that the method was not directed to patent-eligible subject matter because it contributed nothing "inventive" to the law of nature that lay at the heart of the claimed invention. . . . In concluding that the claims did not add "enough" to the natural laws, the Court was particularly persuaded by the fact that "the steps of the claimed processes . . . involve well-understood, routine, conventional activity previously engaged in by researchers in the field."

Just as a patent involving a law of nature must have an "inventive concept" that does "significantly more than simply describe . . . natural relations," a patent involving a product of nature should have an inventive concept that involves more than merely incidental changes to the naturally occurring product. In cases such as this one, in which the applicant claims a composition of matter that is nearly identical to a product of nature, it is appropriate to ask whether the applicant has done "enough" to distinguish his alleged invention from the similar product of nature. Has the applicant made an "inventive" contribution to the product of nature? Does the claimed composition involve more than "well-understood, routine, conventional" elements? Here, the answer to those questions is no.

Neither isolation of the naturally occurring material nor the resulting breaking of covalent bonds makes the claimed molecules patentable. We have previously stated that "isolation of interesting compounds is a mainstay of the chemist's art," and that "[i]f it is known how to per-form such an isolation doing so 'is likely the product not of innovation but of ordinary skill and common sense.'" Aventis Pharma Deutschland GmbH v. Lupin, Ltd., 499 F.3d 1293, 1302 (Fed. Cir. 2007). Similarly, the structural changes ancillary to the isolation of the gene do not render these claims patentable. The cleaving of covalent bonds incident to isolation is itself not inventive, and the fact that the cleaved molecules have terminal groups that differ from the naturally occurring nucleotide sequences does nothing to add any inventive character to the claimed molecules. The functional portion of the composition—the nucleotide sequence—remains identical to that of the naturally occurring gene.

The majority suggests that I have "focus[ed] not on the differences between isolated and native DNAs, but on one similarity: their informational content." In light of Mayo, that approach seems appropriate. The informational content of the nucleotide sequences is the critical aspect of these molecules; the terminal groups added to the molecules when the covalent bonds are broken—to which the majority and concurring opinions attribute such significance—are not even mentioned in the claims. The nucleotide sequences of the claimed molecules are the same as the nucleotide sequences found in naturally occurring human genes. In my view, that structural similarity dwarfs the significance of the structural differences between isolated DNA and naturally occurring DNA, especially where the structural differences are merely ancillary to the breaking of covalent bonds, a process that is itself not inventive.

Regardless of your policy perspective on patent eligibility, Judge Bryson's opinion is clearly the most faithful to the Supreme Court's Mayo decision. The only problem is that Judge Bryson ignores other relevant subject matter eligibility cases such as Chakrabarty and Funk Bros. Of course, this highlights a real problem with subject matter eligibility doctrine – the cases do not fit together in any coherent fashion.

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An interesting aspect of Judge Lourie's opinion is his attempt to wash his hands of the public policy results of the decision:

[I]t is important to state what this appeal is not about. It is not about whether individuals suspected of having an increased risk of developing breast cancer are entitled to a second opinion. Nor is it about whether the University of Utah, the owner of the instant patents, or Myriad, the exclusive licensee, has acted improperly in its licensing or enforcement policies with respect to the patents. The question is also not whether is it desirable for one company to hold a patent or license covering a test that may save people's lives, or for other companies to be excluded from the market encompassed by such a patent—that is the basic right provided by a patent, i.e., to exclude others from practicing the patented subject matter. It is also not whether the claims at issue are novel or nonobvious or too broad. Those questions are not before us. It is solely whether the claims to isolated BRCA DNA, to methods for comparing DNA sequences, and to a process for screening potential cancer therapeutics meet the threshold test for patent-eligible subject matter under 35 U.S.C. § 101 in light of various Supreme Court holdings, particularly including Mayo.…

Congress is presumed to have been aware of the issue [of gene patents], having enacted a comprehensive patent reform act during the pendency of this case, and it is ultimately for Congress if it wishes to overturn case law and the long practice of the PTO to determine that isolated DNA must be treated differently from other compositions of matter to account for its perceived special function. We therefore reject the district court's unwarranted categorical exclusion of isolated DNA molecules.

In other words, we don't make policy, we just call balls and strikes.

Next Steps: In my estimation, this case is not over. There is a strong possibility of either an en banc rehearing by the full 12-member Federal Circuit and/or a grant of certiorari by the US Supreme Court.

More to come, but for now read the opinion here: /media/docs/2012/08/10-1406.pdf