August 2012

Federal Circuit Panel Splits on Standard of Review for Litigation Misconduct

In Highmark, Inc. v. Allcare Health Mgmt. Sys., Inc., __ F.3d __ (Fed. Cir. Aug. 7, 2012), a divided panel remanded for further proceedings the district court's award of attorneys' fees against an unsucessful patentee based upon assertion of frivolous infringement claims and litigation misconduct.  The case is noteworthy for a few reasons.

First, the facts.

The patentee asserted infringement of several claims out of the 102 claims in the '105 patent, including claims 52, 53, and 102.  The patent generally related to a method of determining whether a review of proposed treatment as part of health care reimbursement by an insurer was needed, and a way to preven tpayment until the treatment has been approved.  The district court granted the accused infringer's motion for summary judgment of non-infringement as to all three claims, and in fact the accused infringer did not oppose summary judgment on claim 102.  

While that decision was on appeal (and before it was affirmed under Fed. Cir. R. 36), the accused infringer moved the court to find the case exceptional, and also moved for Rule 11 sanctions.  The district court found it exceptional and found violations of Rule 11, and awarded about $5.2 million in fees and expenses.  The lawyers then withdrew from representing the patentee, based upon conflicts of interest, and moved seperately to reconsider the Rule 11 sanctions; the district court heard additional evidence from those attorneys, and then vacated the Rule 11 sanctions against the attorneys. Meanwhile, the patentee sought reconsideration of the exceptional case finding against it, but that was denied.  (The appellate court decision does not specify what the conflict was, but reading between the lines it may have been that the attorneys believed the client had not disclosed information to them.  From the opinion, it appears that Rule 11 sanctions had been imposed solely on the attorneys, not the client.)

On appeal, the Federal Circuit split, 2-1. The majority opinion by Judge Dyk (with Judge Newman, dissenting in part was Judge Mayer) stated that for a patentee's suit to be frivolous in terms of Section 285, both (1) the litigation had to have been brought in bad faith and (2) the litigation had to have been objectively baseless.  Both prongs had to be satisfied as to each asserted claim, and so determination of an exceptional case finding was made on a claim-by-claim basis.

With respect to the subjective bad faith prong, the court was in apparent agreement that it required proof of clear and convincing evidence of subject bad faith, which were reviewed for clear error.

With respect to the second prong, the disagreement between Judge Mayer and the panel majority centered on the standard of review for the second prong.  The panel majority emphasized that objective baselessness was a question of law based on underlying mixed questions of law and fact, and so was subject to de novo review, citing Bard Peripheral Vascular, Inc. v. W.L. Gore & Assocs., Inc., __ F.3d __ , 2012 WL 2149495 (Fed. Cir. June 14, 2012).   Judge Mayer, in contrast, argued that Bard had incorrectly applied the de novo standard of review to this question, when it had in fact been subject to the highly deferential "clear error" standard.  He wrote that "Bard was simply wrong…."   In its response to his argument, the panel majority viewed Judge Mayer's reading of Bard as inconsistent with Supreme Court precedent interpreting the sham litigation exception to the First Amendment, including Professional Real Estate Investors, Inc. v. Columbia Pictures Indus., Inc., 508 US 49 (1993), and that deference was otherwise unwarranted due to policy reasons.

With respect to the merits, the focus of the appellate court decision was the assertion of claim 102.  In full, that claim provided (with the key language in the preamble emphasized):

A method of managing an integrated health care management system having input means, payment means and memory storage comprising:

(a) storing through said input means into said memory storage personal health profile data for each of a predetermined plurality of persons;

(b)storing into said memory storage symptoms and treatment data for each of a predetermined plurality of health profiles and problems;

(c) storing in said memory storage criteria for identifying treatments requiring utilization review;

(d) storing in said memory storage criteria for identifying treatments requiring second opinions;

(e) entering into said system information iden- tifying a proposed medical treatment for one of said plurality of persons;

(f)identifying whether or not said pro- posed medical treatment requires utilization review; and

(g) preventing said system from approving payment for said proposed medical treatment if said proposed medical treatment requires utilization review until such utilization review has been conducted.

The court reasoned that the preamble was limiting because the limitations in the claim body (such as "said system" in elements (e) and (g) could derive their antecedent basis solely from the preamble.  It further noted statements in the prosecution history that supported this construction, and noted that the patentee had agreed with this construction in litigation.

However, there was no plausible argument that this claim was infringed, and that fact seemed undisputed.  As a result, the court found the assertion objectively baseless.

With respect to subjective bad faith, the court concluded that there was no showing that, though it had lost, the "allegations are supportable so as to negate a finding of bad faith."  While "an adequate pre-filing investigation may negate a claim of bad faith," the district court had found that this did not occur; however, the majority stated that because the patentee had engaged in bad faith conduct from the inception, "because it knew or should have known that the allegation of infringement of claim 102 was frivolous — we need not examine the pre-filing investigation."  Further, it rejected the argument that the fact that the district court had vacated the Rule 11 sanctions was inconsistent with the exceptional case finding, stating that "a lack of sanctions against attorneys is not itself a ground for barring sanctions against a client."  Without explanation, the majority stated that the evidence that had led to vacatur of the Rule 11 sanctions "had no bearing on the interpretation of claim 102" or the patentee's knowledge of infringement.

With respect to claim 52, the court reached the opposite conclusion, finding that the patentee's construction, which would have led to infringement, was not "so unreasonable that no reasonable litigant coudl believe it woudl succeed."  Thus, the accused ifnringer failed to show that "under this alternative claim construction, the allegations of accused infringement were objectively unreasonable."

Turning to litigation misconduct as a basis to affirm the award, the court analyzed the three instances relied on by the district court, and found each one insufficient to justify the award because the accused infringer failed to show that any were objectively unreasonable when made.  While two of these are fact-specific, one instance was "shifting claim construction" with respect to one element of claim 52.  The court set out the different constructions proffered by the patentee, but reasoned that they were "linguistic shifts" which did not "differ in substance," and so constituted "minor word variations" that also may have been caused by the intervening Federal Circuit decision in Phillips.

As a result, the district court's finding that assertion of claim 102 rendered the case exceptional, but remanded for the district court "for a calculation of attorneys' fees based on the frivolity of claim 102 allegations only."

What's the case mean?

Clearly, careful consideration of infringement is required.  Assertion of even one non-infringed claim can result in some fee-shifting.  A party who drops infringement claims late in a case, such as here when faced with a motion for summary judgment, will likely face a motion to shift some fees, for example.

The case also illustrates the need for careful documentation of pre-suit investigation. While the award here did not turn on pre-filing investigation, the attorneys were able to avoid the Rule 11 sanctions based upon their presentation of evidence concerning pre-suit investigation.

Finally, with respect to the issue on which the panel divided — the standard of review and the question of whether objective reasonableness was reviewed for clear error or under the de novo standard — there are lessons for both sides.  On appeal, the victor in a fee shifting case must be prepared to withstand de novo review, and to do so on a claim-by-claim basis.  This renders appeals more expensive, and when a fee award is part of the merits on appeal, makes it difficult as a matter of space and writing to effectively address all issues.  

As for who was right about the standard of review, stay tuned.

 

Monsanto wins $1b verdict on RoundUp Ready Seed Patent

Dr. EvilBy Dennis Crouch

The PACER entry is compelling:

JURY VERDICT For: Plaintiffs Against: Defendants In the Amount of: One Billion Dollars. (Entered: 08/02/2012)

In his August 6 order, Judge Webber confirmed the jury verdict that DuPont/Pioneer willfully infringe Monsanto's GMO roundup-ready seed patent. The jury rejected the defendants' claims that the asserted patent was invalid; that the patent had been finally obtained through inequitable conduct; and that the reissue patent improperly expanded the scope of the original claims. The judge also confirmed the jury's reasonable royalty damage award of "One Billion Dollars ($1,000,000,000)."

The asserted patent was Monsanto's reissue No. RE 39,247 and the accused product was DuPont's Optimum GAT soybean line that has never been released to the public. Rather, thus far DuPont's use of the patent has been for research purposes. No matter – the US has only a de minimis research defense that certainly does not apply here. See Madey v. Duke. Thus, unlicensed use of the Monsanto genetically modified soybean seed counts as infringement, even if that use was only for the development of a commercial product.

There is no question that this innovation was groundbreaking and has transformed the landscape of American agriculture. The genetic modification makes crops tolerant to the herbicide glyphosate. Although far from organic, glyphosate (RoundUp) has a much smaller negative environmental impact than other herbicides. In addition, the use of glyphosate has allowed for no-till farming that greatly reduces topsoil runoff and energy demands. In his press release, Monsanto's General Counsel David Snively wrote that the verdict "highlights that all companies that make early and substantial investments in developing cutting edge technology will have their intellectual property rights upheld and fairly valued." Snively's remarks are perhaps overstated, but at least have some kernels of truth.

The damages theory was interesting. Since the accused product was not yet on the market, Monsanto did not seek any lost profit. Rather, Monsanto demanded a reasonable royalty for the research-use made by the defendants. Monsanto argued that the use of Monsanto's invention in DuPont's labs and Pioneer's test fields gave those companies an "improper head start" in making the GM seeds. The judge and jury agreed – if those companies wanted to build upon the invention then they should have first obtained a license. In the pharmaceutical world, 35 U.S.C. § 271(e) offers a research exemption for this type of activity. However, that exception does not apply here because of the low level of regulation over genetically modified food-products. The patent is set to expire in 2014. The patentee's right-to-exclusive-research supported by this case means that the 2014 date offers a starting-date for follow-on competitive research. Any actual products building directly upon the patented invention will arrive on the market sometime later.

I sat-in on one day of the jury trial that was held in St. Louis, Missouri. The eight-member jury were largely attentive as they listened to DuPont's technical expert explain DNA and problems with the patent. I smiled at seeing the jury members walk in wearing t-shirts and carrying notepads. Their attitude and attire was a severe contrast to the room full of two-dozen attorneys and experts (each charging hourly). Although I'm sure that Judge Webber could have ably decided the case himself, the jury of individual citizens gave me a bit more confidence in our system and, in my mind, offers the ultimate reality check for this type of case. At least some of the jury members appear to be fans of Dr. Evil.

The level of damages, claim construction, and other issues will be the subject of an appeal the Court of Appeals for the Federal Circuit.

Federal Circuit to Hear En Banc Appeal on Its Jurisdiction over All-But-Accounting Patent Decisions

By Dennis Crouch

Robert Bosch LLC v. Pylon Mfg. Corp. (Fed. Cir. 2012)

In a sua sponte order, the Federal Circuit has announced that case to be heard en banc to determine whether the appellate court has jurisdiction over a judgment on patent infringement liability in a bifurcated case even before issues of damages and willfulness have been adjudged. The en banc order highlights 28 U.S.C. § 1292(c)(2) as likely governing the case. That statute provides the Federal Circuit with:

exclusive jurisdiction … (2) of an appeal from a judgment in a civil action for patent infringement which would otherwise be appealable to the United States Court of Appeals for the Federal Circuit and is final except for an accounting.

The question on appeal is thus, whether the district court case is “final except for an accounting.”

Current precedent is somewhat confused. In Majorette Toys (U.S.) Inc. v. Darda, Inc. U.S.A., 798 F.2d 1390 (Fed. Cir. 1996), the court arguably classified the calculation of attorney fees and court costs as “accounting” but did not place the principle damages award in that category. In a recent order, the Federal Circuit took a narrow interpretation of Majorette by refusing to hear an appeal of an attorney-sanction before the dollar value of the sanction had been set. Orenshteyn v. Citrix Systems, Inc., — F.3d —-, 2012 WL 3101666 (Fed. Cir. 2012). Judge Newman dissented in Orenshteyn – arguing that the sanction dollar value constituted “accounting” under the law. In Falana v. Kent State University, 669 F.3d 1349 (Fed. Cir. 2012), the court ruled that “the district court’s exceptional case finding and award of attorney fees” were not properly before the court because the dollar values had not been calculated and those values were more than “accounting” under the statute. Falana was decided by Judges Linn, Reyna and Prost.

The en banc order raises two particular questions:

  1. Does 28 U.S.C. § 1292(c)(2) confer jurisdiction on this Court to entertain appeals from patent infringement liability determinations when a trial on damages has not yet occurred?
  2. Does 28 U.S.C. § 1292(c)(2) confer jurisdiction on this Court to entertain appeals from patent infringement liability determinations when willfulness issues are outstanding and remain undecided.

Briefs of amici curae may be filed without consent of the parties or leave of the court.

 

Guest Post by Christal Sheppard: Solving a Knotty Problem: An Outrageous Call for Patent Reform Part Deux

Dr. Sheppard is an Assistant Professor of Law at the University of Nebraska Lincoln College of Law.  Prior to joining the University of Nebraska, Dr. Sheppard was Chief Counsel on Patents and Trademarks and Courts and Competition policy for the United States House of Representatives Commmittee on the Judiciary. – Jason

By A. Christal Sheppard

Just over a week ago, Dennis Crouch stated on Patently-O that “[i]t is simply ridiculous that after 40 years of debate, we still do not have an answer to the simple question of whether (or when) software is patentable.”  The confusion on what is and what is not patentable is not a new debate but has come to a head in the last few years with the Supreme Court taking on certiorari multiple cases on the matter of patentable subject matter and the Court of Appeals for the Federal Circuit, arguably, disregarding Supreme Court precedent.

We all understand the problem[1], but what is the solution?  The question of what should be patentable is fundamentally a public policy decision.  This public policy decision is one that the framers of the Constitution contemplated and specifically tasked one specific entity with balancing the equities.  The Constitution states “The Congress shall have Power…[t]o promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”  Congress not the Courts was tasked to determine what should be eligible for the “embarrassment of a patent.”  However, the Courts, led by the Court of Appeals for the Federal Circuit, not the Congress, have driven the expansion of Patentable Subject Matter to “anything under the sun made by man.” 

Case law dictates that the intent of Congress was 1) that patentable subject matter is a requirement separate from that of the other requirements of the patent laws and 2) that Congress intended for anything under the sun made by man to be potentially patentable with the exception of laws of nature, natural phenomena and abstract ideas. Thus, the Courts have, by a stepwise expansion of patentable subject matter to software and business methods, created a situation whereby the high tech industry has been legally encouraged to tie itself into a Gordian knot.  A knot that, without overruling prior precedent, or creative interpretation of precedent, the Courts cannot resolve.

This blog post is to propose that the United States Congress immediately take an active role in the creation of the parameters for patentable subject matter.[2] Congress is the only entity that has the ability and the resources to resolve this conflict in a reasonable and responsible manner. It is also the entity charged by the Constitution with doing so.

I’m not unaware that using the terms “reasonable” and “responsible” in the same sentence with the United States Congress during an election year will globally elicit sound effects from chortles to foul language questioning my mental facilities.  However, below are a few points that are worth considering regarding who is best positioned to advance a solution to what most of the intellectual property community would consider a mess. 

  1. The Constitution does not require patents to be granted and while our international agreements do require minimum patent rights, software and business methods are not among them.[3]  Currently we have a Court created expansion of the definition of what is eligible for patent.  Congress has yet to wade into this morass of what should be eligible for a patent except to provide for exceptions to the Court-created expansion. Congress has created exceptions in piecemeal “fixes”, specific individual carve-outs, instead of addressing the broader issue head-on.[4]
  2. History shows that Congress once before stepped in when the Supreme Court and the predecessor to the Court of Appeals for the Federal Circuit were in discordance.  In the 1940s, the country was then also wrestling to establish a standard of invention.  The Administration appointed a Commission and the patent bar was up in arms.  As a result, section 103 – nonobviousness – was added to the statute by Congress in 1952 to inject a stabilizing effect that the Courts and general practice had not been able to accomplish over decades.  What is needed in the current situation is stabilization.  Today, the Courts are destabilizing the law of patentable subject matter rather than stabilizing it.
  3. Businesses need certainty to operate and to plan effectively. Only Congress can be prospective in its resolution.  For instance, if Congress decides that software and business methods are not patentable subject matter ONLY the Congress can make this prospective to not conflict with settled expectations.  If the Supreme Court narrows patentable subject matter, or patentability more generally, trillions of dollars of company valuation evaporate from the balance sheets with one Supreme Court decision.[5]  However, Congress can decide that starting on a date certain in the future that all patents granted or applications filed before that date are under the “old” common law rules and all patents post-implementation are under the new law.  Congress can provide finality on this issue without gutting company value.[6]  
  4. Only Congress can create an alternative method of protection, apart from patent, for items that they determine do not meet the test for “promoting the process of science.”  For example, concurrent with the delayed implementation of a narrower definition of patentable subject matter, Congress can provide sui generis protection for those fields they decide to carve-out.  Many such ideas have been proposed, such as shorter exclusivity duration and limited remedies.
  5. A Congress, unlike the Courts whose precedent binds future judges, cannot bind a future Congress.  Should the law of patentability need to expand for unknown advancements, Congress can do that in a way that is much less disingenuous than the Courts.   The framers of the Constitution contemplated this in their directive to Congress.  The language in the Constitutional defining  what should be eligible for the monopoly is malleable so that patent law can adjust as technology and the need for promotion for the advance of science changes over time. 

There are a multitude of very good reasons why calling on Congress is not a perfect solution.  But with Myriad and the patentability of gene sequences and genetic testing on the horizon, does the intellectual property community want the Courts or Congress to decide this public policy issue?  Businesses need certainty and only Congress can now provide that stabilizing influence without destabilizing entire industries.  Whether Congress will or not, ought not prevent the assertion that they should. 

Food for thought…


[1] The Supreme Court decisions have done nothing to clarify what is and what is not patentable.  At this juncture, not only is the Federal Circuit in rebellion against the Supreme Court; an influential judge from another circuit dismissed an entire high-tech case with prejudice and promptly penned an article entitled “Why There Are Too Many Patents in America”; the International Trade Commission is under siege from an explosion of technology cases and recently sought comment from the public as to whether certain patents should have limited remedies; the Administration (United States Patent and Trademark Office and the Department of Justice) have differing opinions regarding the patentability of genes and genetic tests; thermonuclear patent warfare between high tech companies is overloading our courts; market based solutions are spawning Fortune 500 companies as the new patent troll; and a patent valuation bubble reminiscent of the real estate market before the crash is driven ever forward as companies amass patents as a shield of paper armor not as an instrument of innovation. 

[2] One thing is certain, there will not be unanimous agreement on what should be patentable subject matter; however, someone should decide and should decide now.  Moreover, that decision should not negatively affect those who have relied upon the law as the Court defined and expanded it over the last 40 years only to now sound the horns of retreat. 

[3] I am not here advocating for any particular resolution, I am merely pointing out a fact.

[4] Prior user rights for business method patents in the 1999 American Inventors Protection Act; Human organisms, tax patents and creating a business method patent post-grant opposition procedure in the 2011 America Invents Act.  The Congress did not address the latter three as patentable subject matter issues, but in carving them out the Congress is showing that there are additional areas that they have determined should not be entitled to patents where the Courts have determined otherwise. 

[5] Of course patents are subject to case-by-case challenges but the Supreme Court seems to be signaling that whole categories of patents, while still technically eligible, would not meet the Courts inventiveness test as a practical matter.

[6] Congress can also provide some finality on the issue of whether patentable subject matter is a separate requirement from 102, 103 and 112.

Incentivizing Discovery (rather than invention)

by Dennis Crouch

In my patent classes, we talk about the distinction between invention and discovery (and even re-discovery).  The patent statute itself opens the door to patenting of discoveries in addition to inventions.  However, modern courts have largely ignored or rejected that possibility.  The following case is an interesting starting point for a discussion of the value of discovery (rather than invention) and the role of the patent system in providing an incentive for that activity.

+ + + + +

In re Beineke (Fed. Cir. 2012)

Professor Beineke loves the two white oak trees growing in his front yard. He loves them so much that he filed for patent protection. Specifically, Beineke filed two plant patent applications asserting that the trees qualified for protection under 35 U.S.C. 161.  That statute was last edited in 1954 and reads:

[w]hoever invents or discovers and asexually reproduces any distinct and new variety of plant, including cultivated sports, mutants, hybrids, and newly found seedlings, other than a tuber propagated plant or a plant found in an uncultivated state, may obtain a patent therefor, subject to the conditions and requirements of this title.

The USPTO rejected the applications — concluding that the trees did not qualify as patentable discoveries because, inter alia, they had been “found in an uncultivated state” in direct contradiction to the statute. 

On appeal, the Federal Circuit has affirmed the rejection. In doing so, the court has re-affirmed that the patent system requires human activity in the creation of the subject matter sought to be patented.  In particular, the court held that the patent applicant must have either (1) been “the result of plant breeding or other agricultural or horticultural efforts;” (2) been “created by the ‘inventor’;” or (3) been found as a seedling in a cultivated state.  Beineke was unable to qualify under any of the these three prongs and thus the court held his claims unpatentable.

+ + + + +

For those concerned with plant patents, there are several important doctrinal points in the case, including the court’s express recognition that it has not fully defined the scope of the “cultivated state” requirement.

+ + + + +

I’m sure that I’ll discuss footnote 8 next time that I teach the topic of “found property” in my 1L property law class.  In that note, the court makes clear that “the 1954 amendments … made seedlings found on other people’s land patentable.”  What if the discoverer was trespassing?

The OED Asserts it Has Jurisdiction to Discipline You in Far Broader Circumstances Than You might Think

This follows up on a post below about former client conflicts, about the catch-all rules.

The OED, of course, regulates patent agents and patent lawyers.  A practitioner who violates a provision of the PTO Code can be disciplined by the OED.  Discipline can include disbarment, suspension, a public reprimand, or a private reprimand.  So, if a practitioner steals money from a client for whom he is prosecuting a case, there's no doubt the OED would have jurisdiction to discipline the practitioner.

Over the years, I've had practitioners contact me because the OED was coming after them for things the practitioner did in, for example, patent litigation involving a patent that the practitioner had nothing to do with prosecuting.  Say, for example, the lawyer overcharged the patentee for representing it in an infringement suit.

There are lots of rules in the PTO that could "reach" this conduct and so permit the OED to discipline the practitioner for conduct having nothing to do with practice before the Office.  For example, 37 C.F.R. § 10.23(b)(5) prohibits conduct that is “prejudicial to the administration of justice.”  (In the forthcoming edition of our book, I go into what the PTO says that phrase means, but let's put that to the side.)  Thus, on its face section 10.23(b)(5) would reach this conduct: overcharge a plaintiff in a patent suit, and lose your ability to prosecute patents.

 In my view, the OED does lack jurisdiction, but the OED believes otherwise, and some have agreed with it in articles.

Let's start with the text of this rule:  on its face, it reaches the conduct I've described (assuming that overcharging is, in fact, "prejudicial to the administration of justice."  Nothing in the rule itself says that it has to be prejudicial to the administration of justice at the PTO.  And, some say the rule means what it says.  An important commentator, Cameron K. Weiffenbach,  wrote

Disciplinary Rule 37 C.F.R. § 10.23(b)(5) is directed to conduct that is “prejudicial to the administration of justice.”

The expression “prejudicial to the administration of justice” is not defined in the USPTO rules. This rule is, however, associated with misconduct in court proceedings.

The USPTO does not use the term “court” in its rules, but the term “tribunal,” which the USPTO defines, includes the “courts, the office [USPTO], and other adjudicatory bodies.” 37 C.F.R. § 10.1(z).

Thus, conduct that could constitute violation of 37 C.F.R. § 10.23(b)(5) could be conduct that impairs the public confidence in the USPTO such as lying to a client or to the USPTO, or neglecting a matter before the USPTO or even failing to pay a parking ticket

(Emph. added.)

Again, I know the OED believes that this rule reaches very far.  From what I have seen, the OED believes it can come after you for conduct done anywhere if it is "prejudicial to the administration of justice."  And, I have to tell you, there are several other provisions of the PTO Code that aren't limited, expressly, to practice beforre the Office.

Why do I think that it doesn't have jurisdiction unless it's a matter before the Office?  Well, because the PTO said so, repeatedly, and to avoid an interpretation of this very rule that would let it have that power.

Here's what happened.

When the PTO was adopting the PTO Code back before 1985, many people complained that, as then proposed, the PTO Code applied to anything the practitioner was doing — in prosecution, or not.  The PTO repeatedly responded to those comments before adopting the final rules by doing three things: (1) it adopted 37 CFR 10.1 to say that the PTO was intending solely to regulate practice before the Office; (2) the PTO amended many rules in light of comments to include a provision in 37 CFR 10.1 that says "with respect to practice before the Office," and (3) with respect to other rules, in comments the PTO repeatedly said, basically, "we don't have to include a phrase saying this specific rule only applies to conduct before the Office because 10.1 says no rule reaches that far."  

With respect to this specific rule —  "prejudicial to the administration of justice" provision — in fact, the PTO said that that rule was limited to practice before the Office, and pointed to Section 10.1 as a basis for not having to say so explicitly.

So, where we are in my view is:  these catch-all rules can't catch anything that does not constitute "practice before the Office."  The PTO said they didn't, so they can't.

But, like I said, I've had folks make that argument to the OED, and I know it disagrees.  Seems to me there's a problem with that, but you need to be aware of it.

In closing, and to be clear, there are rules in the procedural rules at the OED that allow for "reciprocal discipline."  So, if a state bar (or, I suppose, a federal court) were to discipline a lawyer for overcharging a patent infringement client, or for failing to pay that parking ticket, the OED could also impose discipline.  But, without getting boring on you (ha, you say, you did that at the headline!), there are a lot of procedural protections in that circumstance that aren't present even where, say, a judge were to issue an order sanctioning a practitioner for something done in litigation.

Finally, I'll note that there are some choice of law issues beneath all of this that lead me to believe that he OED would never be applying these rules to conduct that occured in a parking ticket matter, or a patent infringement suit, but those are for another day.

Director Kappos: Some Thoughts on Patentability

The following is a reprint from USPTO Director Kappos’ recent statement on patentable subject matter:

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The recent Federal Circuit decision CLS Bank International v. Alice Corporation raises some important points that offer insight on advancing prosecution of patent applications. In CLS Bank, the claims to a computer-implemented invention were found to fall within an eligible category of invention and not to mere abstract ideas. In answering the question of eligibility under § 101, I found it interesting that the court looked at the different roles of the various statutory provisions, § 101, 102, 103, and 112. Sections 102, 103 and 112 do the substantive work of disqualifying those patent eligible inventions that are “not worthy of a patent”, while § 101 is a general statement of the type of subject matter eligible for patenting. The court notes that, while § 101 has been characterized as a threshold test and certainly can be addressed before other matters touching on patent validity, it need not always be addressed first, particularly when other sections might be discerned by a trial judge as having the promise to resolve a dispute more expeditiously or with more clarity or predictability. The court in CLS Bank also recognized that the exceptions to eligibility—laws of nature, natural phenomenon, and abstract ideas—should arise infrequently.

Based on my experience, I appreciate the wisdom of the court’s discussion relating to resolving disputed claims by focusing initially on patentability requirements of § 102, 103, and 112, rather than § 101. I have found that when claims are refined to distinguish over the prior art, recite definite boundaries, and be fully enabled based on a complete written description, they do not usually encounter issues of eligibility based on reciting mere abstract ideas or broad fundamental concepts. Put another way, every business looks for opportunities to sequence workflow so that the first issues addressed are the ones that can simplify or completely resolve other issues. This is good basic management for businesses, and for patent offices.

While courts can resolve patent disputes in the most expeditious manner given the facts of the case, the Office has the unique duty of ensuring that all patentability requirements are met before issuing a patent. Applications that are presented in the best possible condition for examination with clear and definite claims that are believed to distinguish over the prior art and are supported by a robust disclosure will most likely not encounter rejections based on eligibility. Avoiding issues under § 101 can have a very positive effect on pendency and help examiners focus on finding the closest prior art, leading to strong patent protection. Hopefully, the guidance supplied by the Federal Circuit in CLS Bank can help us as we continue to work on reducing pendency and enhancing quality of issued patents.

And on the General Ethics Front: We Law Professors, We’re Underpaid and Overworked

No, that's not what I think, but some of my fellow law professors do feel that way, a fact I learned from a wonderful book by Brian Z. Tamanaha called "Failing Law Schools," that I'm about half way through.

I'll post more about the salary issue later, but on this lazy day (I'm at the beach with my wife, on a well-deserved but brief vacation after serving as an expert witness in the Monsanto v. DuPont case just tried in St. Louis (I was an expert retained by DuPont)), I wanted to just ask a question that underlies some strong opinions I have on that I'll leave aside for now, but the question is this:

Do law professors' writings ever help you in your practice?  How often if ever to they really give you help, or give you information that you cite in a brief? (I'd like to focus on law reviews, etc., but blogs matter too, but if you mean a blog rather than an article, please say so.  I'm curious.

Thoughts?

Federal Circuit Again Supports USITC Jurisdiction for Pure-Enforcement NPEs; Court Again Splits on Claim Construction

by Dennis Crouch

InterDigital v. USITC and Nokia (Fed. Cir. 2012)

InterDigital is a publicly traded company whose primary revenue comes from patent licenses.  The majority of 3G mobile handset manufacturers pay royalties to the company.  After conducting its investigation, the US International Trade Commission (USITC) found that Nokia did not infringe InterDigital’s patents.  On appeal, the Federal Circuit has reversed based upon the USITC’s improper and unduly narrow construction of the claim terms “code” and “increased power level.”

The USITC was designed to protect US industry from “unfair” foreign competition.  Thus, the staute includes a “domestic industry” requirement that must be satisfied as a precondition of enforcing patent rights through the USITC.  In the appeal, Nokia argued that InterDigital could not satisfy the domestic industry requirement.  That argument was rejected by the USITC and on appeal as well.  The Federal Circuit held particularly that “patent licensing alone” can be sufficient to satisfy the US industry requirement and that the statute does not require that any actual articles covered by the patent be manufactured in this country. “That is, the domestic industry requirement is satisfied if there is a domestic industry based on substantial investment in the patent’s exploitation where the exploitation is achieved by various means, including licensing.” (internal formatting removed).

Writing in dissent, Judge Newman would have sided with the accused infringer and held the patent not-infringed.  Newman writes:

The panel majority’s enlargement beyond the invention described in the patents, in disregard of the protocols of claim construction, simply adds uncertainty to the patent grant. In today’s technology-based commerce, rational economics requires that the patent provide a reliable basis for investment. The patentee is in control of the specification that describes the invention. The panel majority’s theory that “the inventors’ failure to include a reference to the alternative embodiment in the specification does not justify excluding that embodiment from the coverage of the claims” is a departure from routine rules of the meaning of legal documents, and in negation of the notice purpose of the patent claim. From this unsound approach to claim construction, and its incorrect conclusion on the facts of this case, I respectfully dissent.

Judge Newman’s suggestion here is to give claim terms a narrow definition when the patentee uses an ambiguous term and does not provide any limiting definition to that term. 

Copyright Claim Against Patent Firm Who Submits Copyrighted Article Withstands Rule 12(b)(6) Challenge

    I still don't quite know what to make of this. 

    Let's start by framing the issue in terms of ethics: a lawyer has an obligation to disclose material information to the USPTO under Rule 56 and TheraSense.  Sometimes, that may require disclosure, not just of a citation, but of an actual copy of an article or document.

    What if submitting a document is required, but doing so violates copyright law?

    In Am. Institute of Physics v. Schwegman Lundberg & Woessner, PA, __ F.Supp.2d __ (D. Minn. July 2, 2012), the alleged copyright holder sued the patent firm and contended that filing copies of copyrighted articles violated its copyright.  The defendant filed a Rule 12(b)(6) motion.  Much of the resulting decision is about pleading requirements post-Twombly, but part of the decision addressed whether "distribution" of the works had occurred:

Finally, Defendants argue that Plaintiffs have failed to adequately plead a public-distribution claim. One of the “bundle of rights” granted under the Copyright Act is the right to “distribute copies . . . of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending.” 17 U.S.C. § 106(3) (emphasis added). The Complaint alleges that Defendants “distribut[ed]” copies of their works “outside of Schwegman” (Compl. ¶ 18), but the only identified recipient of such “distribution” is the PTO. According to Defendants, the PTO is not “the public” under the Copyright Act and, hence, any claim based on their “distribution” to the PTO must fail. (Reply at 6-7.)….

There may be merit to this argument. Some courts have held that a limited distribution to a government agency does not constitute “publication” under the copyright laws….

The problem, however, is that Defendants only casually mentioned this issue in their opening brief, arguing in one sentence – in the midst of the Twombly argument, and without citation to any authority – that “Plaintiffs fail to allege that [the] . . . so-called distributions were made ‘to the public,’ and only public distributions fall within . . . Section 106(3).” (Def. Mem. at 5.) Not until their Reply did Defendants flesh out this argument (over nearly two pages), citing several cases ostensibly supporting it. By not squarely raising this issue in their opening memorandum, the Court believes Plaintiffs did not have an adequate opportunity to address it.  

Consequently, the district court denied the defendant's Rule 12(b)(6) motion — for now.

    So, this narrow band of conduct — submission to the Office — may not be unlawful conduct, but for now let's suppose it is. Obviously, a lawyer cannot engage in illegal conduct.  What does he do when faced with this problem?

    The first step may be to narrow the circumstances in which it arises:  if filing a copy is not required, don't file one.  This could of course cause some delays in prosecution, which may not be in the best interests of the client.  But lawyers obviously should avoid unlawful conduct, particularly conduct that could expose the lawyer to liability, and (I would think) the client to copyright liabilty under some sort of agency theory, at least.

    The second step would be to disclose.  There is no exception to Rule 56 that says material information need not be disclosed if it is subject to copyright.  Indeed, even trade secret information must be disclosed if material to patentability, as you know.

    The third step would be to hope that (a) courts find that disclosure is not distribution or (b) it is fair use in most instances.  I don't know much about copyright law, but my sense from what I do know and from the Schwegman opinion is that the former is likely, and the latter, though an affirmative defense, is also likely.  It will hardly reduce demand for scientific articles if you can find them in files in the USPTO if you're lucky enough to find it.

    I wonder about the other issues where I see copyrighted material copied, say in patent litigation. Discovery materials are not submitted to a court, but are distributed to private parties.  Later, if there's a trial, they are copied and one copy might be used as an exhibit and submitted to a court.  What about those? (I ask not rhetorically since, again, I don't know copyright.)