There has to be more to this dispute.
February 2014
My exhaustive (and last, really I promise!) post about why 101 is not a defense, nor properly raised in CBM proceedings
This is from a declaration I filed in a patent case.
I. Because Section 101 is not “specified” as a “condition for patentability,” and, further, is not a condition for patentability, a “violation” of Section 101 may not be raised in a covered business method proceeding.
The starting point of my analysis is a consideration of the statutory limitation on grounds that can be raised in a CBM proceeding. As part of a limited transitional program, Congress expressly and plainly limited the grounds that can be asserted in a CBM proceeding to a small subset of those than those that can be raised in patent infringement suits. Specifically, although 35 U.S.C. § 282 lists defenses in patent suits, under the AIA in CBM proceedings only the defenses listed in subsections (b)(2) and (b)(3) can be raised. 37 C.F.R. § 42.304. It is clear that subsection (b)(3) does not cover Section 101, since it cites only to sections 112 and 251.
As a consequence, the only potential basis for Section 101 to be a defense – and therefore a proper basis for CBM Review – is if it is within subsection (b)(2), which states: “(2) Invalidity of the patent or any claim in suit on any ground specified in part II [of Title 35] as a condition for patentability.” 35 U.S.C. § 282(b)(2).
Unless Section 101 is “specified” in “part II” as a “condition for patentability,” it is not a proper basis for instituting a CBM proceeding. Sections 100 to 212 are in part II of the Patent Act. Thus, Section 101 is in part II. However, of those one hundred and twelve separate sections, two are “specified” as “conditions for patentability” – sections 102 and 103. Their titles state:
102. Conditions for patentability; novelty.
103. Conditions for patentability; non-obviousness subject matter.
Thus, plainly sections 102 and 103 each is “specified” as a “condition for patentability.” Just as plainly, Section 101 is not “specified” as a “condition for patentability:”
101. Inventions patentable.
In my opinion, the words “specified” as “a condition for patentability” in subsection 282(b)(2) point to only two sections of the one hundred and twelve sections in part two: sections 102 and 103. Congress knew how to specify a condition for patentability by putting the words “condition for patentability” in the title: Section 101 is not specified as a condition for patentability. Any other reading of subsection 282(b)(2) renders the word “specified” superfluous, and it also renders the phrase “conditions for patentability” superfluous. Either result violates a basic tenet of statutory interpretation. Just as it is improper to read “in part II” out, it is improper to read these other express limitations out of the statute.
Even putting aside the fact that only two statutes in part II are specified as “conditions for patentability,” and assuming courts are free to allow defenses to be raised under subsection 282(b)(2) even though they are not specified as “conditions for patentability,” it is clear that, in substance, Section 101 is not a “condition.”
First, reading the statute as a whole (which proper analysis requires), there is no doubt that Congress knew how to write a “condition for patentability.” In substance, sections 102 and 103 are express conditions for patentability. Section 102 begins, “A person shall be entitled to a patent unless . . . .” Section 103 states that “a patent for an invention may not be obtained . . . if the differences” would have been obvious at the time of the invention. Section 102 conditions patentability on novelty; section 103 conditions patentability on non-obviousness.
In stark contrast, Section 101 permissively states that “[w]hoever invents or discovers any new and useful process . . . or any new and useful improvement thereof, may obtain a patent therefor,” but doing so is “subject to the conditions and requirements of this title.” Thus, Section 101 grants permission to an inventor to apply for a patent, subjecting issuance to the conditions and requirements of the title. Further, Section 101 does not limit the person’s entitlement to a patent, unlike Section 102 and 103. It is in my opinion that Section 101 does not “condition” patentability on the invention falling within Section 101: if Congress had wanted to condition patentability on Section 101, it perhaps could have done so, but it plainly did not.
Further, the same legislation that codified the transitional CBM proceeding expressly describes Section 101, not as providing a condition for patentability, but as merely setting forth “categories of patent-eligible subject matter.” AIA § 18(e). Consistent with this, Congress authorized the PTO to rely on certain prior art to invalidate a claim under sections 102 and 103, AIA § 18(c), but the statute never mentions Section 101 as a basis for invalidity.
For these reasons, it is in my opinion clear that, although it is in part II of the Patent Act, Section 101 is not specified as a “condition for patentability” and it is in substance not a condition. Consequently, it is not a ground for review in the CBM proceeding sought by defendant herein.
In my opinion, the clarity of the text ends the inquiry. The text of the statute is not ambiguous. Nor is it absurd to conclude that Congress chose not to make “ineligible subject matter” a basis for CBM: indeed, given the Congressional purpose of speedy review of covered business method patents, a Section 101 inquiry would bog down the PTO in the myriad factual issues underlying the inquiry – many of which involve facts external to the PTO, such as whether the patent “preempts” other methods (i.e., whether there are non-infringing alternatives), what was “routine” or “conventional” in the art, and other facts not likely to be shown entirely by prior art. Omitting Section 101 is far from absurd but instead matches the purpose and intent of Congress to create a speedy, certain proceeding. See generally, Ultramercial, LLC v. Hulu, LLC, 772 F.3d 1335 (Fed. Cir. 2013) (identifying some of the factual inquiries inherent in the question of eligible subject matter).
Even assuming, nonetheless, that it is proper to look beyond the text, in my opinion it is proper to look to the purpose of the statute and legislative intent. Both confirm the plain meaning of the statute.
The purpose of the statute confirms that the CBM procedure was adopted to address shortcomings with the PTO’s ability in the late 1990’s to find prior art, and that was Congress’s intent. The House report makes clear that the purpose was to deal with the perception that in the late 1990’s, the PTO had not found the best prior art to apply under sections 102 and 103:
A number of patent observers believe the issuance of poor business-method patents during the late 1990’s through the early 2000’s led to the patent ‘‘troll’’ lawsuits that compelled the Committee to launch the patent reform project 6 years ago. At the time, the USPTO lacked a sufficient number of examiners with expertise in the relevant art area. Compounding this problem, there was a dearth of available prior art to assist examiners as they reviewed business method applications. Critics also note that most countries do not grant patents for business methods.
The Act responds to the problem by creating a transitional program 1 year after enactment of the bill to implement a provisional post-grant proceeding for review of the validity of any business method patent. In contrast to the era of the late 1990’s-early 2000’s, examiners will review the best prior art available….
H. Rep. 112-98, at p. 54 (June 1, 2011) (emphases added). Thus, the committee report[1] shows that the purpose of the amendments is consistent with the text: to allow those charged within infringement to show that the invention was not new or would have been obvious in light of “the best prior art available.” The report emphasized the lack of “a sufficient number of examiners with expertise in the relevant art area.” Nothing in the House report mentions the failure to recognize “abstract ideas” or the failure to properly apply Section 101. Further, it is absurd to suggest that in the late 1990s lack of access to prior art or lack of sufficient examiners with familiarity with prior art had any impact on the ability to determine what is a “law of nature,” or “abstract idea,” or the like. If anything, this shows that Congress enacted the CBM proceeding for the purpose of responding to the problem of difficulty in finding prior art and experts in the fields of business methods.
Beyond this, the legislative history of the AIA on this transitional program is, like almost all legislative histories, murky. I have reviewed the remarks made on the Floor of the Senate, and there is no doubt that a few members of Congress mentioned business method patents. A fair reading is that at least some members of Congress thought the source of the problem to be addressed was with “abstract” patents, while others believed the failure to consider the most pertinent prior art was the source of the problem. What controls is the language Congress enacted, not my speculation about the intent of a handful of elected representatives.
For the reasons shown above, in my view the text and committee report focus on prior art under sections 102 and 103. As enacted, in my opinion the AIA does not allow review of covered business methods for “eligible subject matter” in terms of Section 101.[2]
II. Arguments I Considered but Found Incorrect.
I understand the PTO’s position is that Section 101 can be a basis for instituting a CBM Review. E.g., SAP Am., Inc. v. Versata Dev. Group, Inc., CBM2012-00001 (Jan. 9, 2013). Director Kappos justified the PTO’s position, not by focusing on the text, but by stating: “This interpretation is consistent with both the relevant case law and the legislative history.”[3] The PTO in its decision in Versata relied upon the same grounds. For the following reasons, this interpretation is incorrect.
First, these authorities simply do not address the text of the statute. The statute is not ambiguous. It is not absurd. There is no reason whatsoever to move beyond the plain text.
Second, the Supreme Court case relied upon to support these views is Graham v. John Deere Co., 383 U.S. 1 (1966). That famous case about Section 103 had nothing to do with whether “eligible subject matter” was a condition for patentability, and did not decide that issue. Instead, in dicta analyzing the “condition for patentability” in Section 103, the court noted:
The Act sets out the conditions of patentability in three sections. An analysis of the structure of these three sections indicates that patentability is dependent upon three explicit conditions: novelty and utility as articulated and defined in § 101 and § 102, and nonobviousness, the new statutory formulation, as set out in § 103. The first two sections, which trace closely the 1874 codification, express the ‘new and useful’ tests which have always existed in the statutory scheme and, for our purposes here, need no clarification. The pivotal section around which the present controversy centers is § 103 . . . .
383 U.S. at 12-13. The statement actually undermines the argument that “eligible subject matter” is a condition for patentability. Graham explains that the Patent Act of 1793 had only two conditions for patentability: utility and novelty (both of which were once in the same statute, a precursor to sections 101 and 102). Id. at 10 (“Although the Patent Act was amended, revised or codified some 50 times between 1790 and 1950, Congress steered clear of a statutory set of requirements other than the bare novelty and utility tests reformulated in Jefferson’s draft of the 1793 Patent Act”). The Graham Court recognized that in 1952 Congress had added a third condition, non-obviousness. See id. at 14 (“Patentability is to depend, in addition to novelty and utility, upon the ‘non-obvious’ nature of the ‘subject matter sought to be patented’ to a person having ordinary skill in the art.’”) (quoting Section 103).
For these reasons, even if Graham is misapprehended as a definitive interpretation of Section 101, the Court’s opinion suggests that “eligible subject matter” is not a condition for patentability. If Graham stated that utility, novelty, and non-obviousness were conditions for patentability, then the Court’s statement that there are “three conditions”[4] means “eligible subject matter” is not one: if “eligible subject matter” were also a condition for patentability, then there would be four, not three, conditions.
I have also seen others avoid the text but instead cite to dicta in Dealertrack, Inc. v. Huber, 674 F.3d 1315 (Fed. Cir. 2012) and to dicta in a footnote in Aristrocrat Techs., Austl. PTY LTd. v. Int’l Game Tech., 543 F.3d 657, 661 (Fed. Cir. 2008). Neither case decided whether Section 101 was a condition for patentability. Although the merits of a Section 101 issue was decided in Dealertrack, the patentee did not contend that Section 101 was not a statutory defense, and the court did not decide that issue. Further, dicta in both cases traces directly back to the dicta from Graham. But loose language can be found in other cases saying exactly the opposite. For example, the Federal Circuit has stated: “The two sections of part II that Congress has denominated ‘conditions of patentability’ are § 102 . . . and § 103 . . . .” Myspace, Inc. v. GraphOn Corp., 672 F.3d 1250, 1260-61 (Fed. Cir. 2012). The Supreme Court made essentially the same observation in Diamond v. Diehr, 450 U.S. 175, 190-91 (1981).
The important fact to me is that none of these cases parse the statutory text, or just examine the purpose and legislative history of the AIA discussed here. Ignoring the actual text in favor of what courts have said a statute says is obviously incorrect. In that regard, the Supreme Court has overridden judicial interpretations of statutes that failed to adhere to the text, and has done so even after decades of having lower courts adhere to those incorrect constructions. See Central Bank of Denver v. First Interstate Bank of Denver, 511 U.S. 164, 177 & 191 (1994) (overruling six decades of case law implying a cause of action), superseded on other grounds by 15 U.S.C. § 78(t)(e). Whatever a court says a statute says, the Constitution makes paramount what the enacted text actually says.
I have also considered whether this analysis improperly relies upon titles to interpret the text. I agree it is generally improper to use the title to interpret text, at least where the title contradicts or is inconsistent with the substantive text. But that principle has no application here: Congress in the text of subsection 282(b)(2) limited the grounds upon which a CBM proceeding may be based to those “specified” in “part II” as “conditions for patentability.” Thus, the statutory text of Section 282 says to look for things “specified” in “part II” as “conditions for patentability.” Consequently, I am not using the title of any statute to interpret the meaning of Section 101: I am applying the plain text of subsection 282(b)(2). I am not using the title to interpret the text with respect to either “specified” as a “condition for patentability” just as I am not with respect to the statute’s use of “specified” in “part II.” Further, as shown above, I use only the text of the statutes to conclude that Sections 102 and 103 are conditions, but Section 101 is not. Reading those three statutes in pari materia (together), it is clear sections 102 and 103 are conditions, but Section 101 is not. The titles confirm the interpretation of the text, but they are not the source of it.
I have also considered other aspects of the legislative history. For example, then-Director Kappos observed: “a key House Committee Report states that ‘the post-grant review proceeding permits a challenge on any ground related to invalidity under section 282.’ H.R. Rep. No.112-98, at 47 (2011).”[5] Yet, it is undeniable that the text of the adopted statute points to only two subsections of Section 282, and so this sentence from that report flatly contradicts the enacted statute. A sentence in a committee report that directly contradicts the plain language does not control. As with most bills, the legislative history of the AIA contains many statements that are not the law, and a few that contradict the statute.
Others have pointed to this statement from a senator from Arizona, Senator Kyl: “section 101 invention issues” were among those “that can be raised in post-grant review.” 157 Cong. Rec. S1375 (daily ed. Mar. 8, 2011). Relying on this statement for the proposition that eligible subject matter is covered by the text is doubly problematic. Foremost, “section 101 invention issues” is not in the enacted text. Further, the Supreme Court has long and repeatedly rejected relying upon one legislator’s statement as having been presented to Congress and enacted into federal law. Doing so jeopardizes the Constitutional requirements of enactment and presentment. This is especially true where, as here, that statement contradicts the plain text as well as other more weighty evidence of legislative intent, coming in the form of Senate reports from the AIA, Congressional reports on the 1952 Act, and Federico’s commentary, discussed above. Those sources – which, if entitled to any weight, are entitled to more weight than one Senator’s floor statement – contradict Senator Kyl’s subjective interpretation of the statute. Again, however, I believe none of this matters here.
To sum up, in my opinion dicta in cases does not control. Dicta in cases that do not analyze the statutory text do not control. A committee report that flatly contradicts the enacted text does not control. And one Senator’s opinion is not enacted statutory text.
[1] The Supreme Court has cautioned against giving weight even to committee reports, admonishing courts that “judicial reliance on legislative materials like committee reports, which are not themselves subject to the requirements of Article I [of the U.S. Constitution], may give unrepresentative committee members – or, worse yet, unelected staffers and lobbyists – both the power and the incentive to attempt strategic manipulations of legislative history to secure results they were unable to achieve through the statutory text.” ExxonMobil Corp. v. Allapattah Serv., Inc., 545 U.S. 546, 568 (2005). Here, the committee report simply confirms the plain text; it is not being used to interpret the text.
[2] As explained above, courts view legislative history, particularly more modern legislative history such that accompanying the AIA, with skepticism. Thus, I only note that the Senate report from 1952 and persuasive commentary by P.J. Federico confirm the plain meaning. First, both reports from 1952 Act state: “Section 101 sets forth the subject matter that can be patented, ‘subject to the conditions and requirements of this title.’ The conditions under which a patent may be obtained follow, and section 102 covers the conditions relating to novelty.” H. Rep. 1923, S. Rep. 1979 (82d Cong. 2d Session) (emphasis added). It is a perversion of the English language to read “the conditions under which a patent may be obtained follow” Section 101, but nonetheless in Section 101. Second and consistent with the plain text and these reports, Federico wrote that Section 4886 – which Congress in 1952 split up into what became sections 101, 102, and (in a sense at least) 103 – had “specified the subject matter for which a patent could be obtained and recited conditions for patentability. In the new code, this section has been divided into two sections, section 101 relating to the subject matter for which a patent may be obtained, and section 102 which defines statutory novelty and states other conditions for patentability.” P.J. Federico, Commentary on the New Patent Act (emphasis added) (available at http://ipmall.info/hosted_resources/lipa/patents/federico-commentary.asp). Thus, as a principal architect of the act, Federico recognized that while Section 4886 had both “identified the subject matter for which a patent could be obtained,” and “recited conditions for patentability,” under the 1952 Act “section 101 relat[ed] to the subject matter for which a patent may be obtained” but “section 102 defines novelty and states other conditions for patentability [e.g., statutory bars to patentability].” Id. Further, Federico’s description is consistent with the reviser’s note to the 1952 act, which stated that the “existing statute is split into two sections, section 101 relating to the subject matter for which patents may be obtained, and section 102 defining statutory novelty and stating other conditions of patentability.”
[3] http://www.uspto.gov/blog/director/entry/ptab_and_patentability_challenges
[4] 383 U.S. at 17.
[5] http://www.uspto.gov/blog/director/entry/ptab_and_patentability_challenges
Federal Circuit Splits on Venue Transfer Issues
By Dennis Crouch
In re Apple Inc. (Fed. Cir. 2014); In re Barnes & Noble (Fed. Cir. 2014)
In a pair of decisions, the Federal Circuit has denied two different petitions for writ of mandamus that sought appellate oversight in the transfer motions. Both cases involved identical split panels with Judges Reyna and Prost in the majority (denying mandamus) and Judge Newman in dissent. Over the past several years, a number of § 1404 transfer petitions have been filed at the Federal Circuit following the court’s 2008 TS Tech decision. See, In re TS Tech USA Corp., 551 F.3d 1315, 1319 (Fed. Cir. 2008).
In both cases here, the majority found that the movant had failed to “meet its exacting burden to demonstrate that the district court was clearly and indisputably incorrect in concluding that the case should not have been transferred” by the District Court judge.
Judge Newman’s dissents are interesting she writes in Apple:
The plaintiff, Core Wireless Licensing, S.A.R.L., is a Luxembourg company having one employee. Core Wireless maintains a wholly-owned subsidiary, Core Wireless USA, a Texas corporation with 6 employees who live in or near Plano, Texas. Core Wireless USA’s employees manage Core Wireless’s patent portfolio, including any licensing agreements deriving therefrom. Neither Core Wireless nor Core Wireless USA makes, uses, or sells the patented subject matter in Texas or elsewhere.
The accused products are versions of Apple Incorporated’s iPhone and cellular iPad products. Apple has been headquartered in Cupertino, California since 1976. Apple’s management and primary research and development facilities are also located in Cupertino where Apple employs over 13,000 people. The record also states that the research, design, and development of the accused products took place in Cupertino and that virtually all Apple business documents and records relating to the research, design, development, marketing strategy, and product revenue for the accused products are located in or near Cupertino. Additionally, Apple has stated that its foreseeable witnesses with knowledge of the research, design, and development of the accused products reside or work in or near Cupertino. (more…)
Man Disrupts Oral Argument at Supreme Court on 285 (humor alert)
Okay, that’s true but… you’ll have to read here to see if he was upset about patent fees or something else.
Industry Responds to White House Calls for Prior Art, Examiner Training
Guest Post by Professor Jorge L. Contreras
As previously reported, on February 20 the White House highlighted its progress on five patent-related policy initiatives introduced in June 2013, announced three new patent-related initiatives, and renewed its call for legislation to combat “patent trolling”. In all, ten different initiatives were discussed. Below is a quick guide to making sense of the most significant ones, as well as a summary of private sector responses to date.
Patent Assertion Entities (PAEs) – In this year’s State of the Union address, President Obama came out publicly against unfair litigation tactics deployed by “patent trolls” and has called on Congress to enact legislation to “curtail abusive patent litigation.” Two of the Administration’s June 2013 initiatives relate to PAE litigation: a proposed PTO rule that would require reporting of real party in interest (re-branded as “attributable ownership”) information in patents and patent applications, and an online toolkit providing links and other information for the recipients of patent demand letters. Among the most useful features of the toolkit are links to advanced demand letter and patent litigation analytics provided by Lex Machina and Docket Navigator. Although the toolkit is available to anyone, its intended beneficiaries are small businesses that have been targeted by some of the more notorious PAEs for using off-the-shelf office equipment like scanners and wireless routers. The Administration seems to realize that both of these initiatives are relatively modest, and it has again urged Congress to enact measures that will have a meaningful impact on reducing abusive patent litigation.
PTO Fixes – The Patent and Trademark Office (PTO) has, fairly or unfairly, come under increasing fire for procedural lapses and staffing inadequacies that allow the issuance of too many “bad” patents. Last week’s announcements contain some meaningful proposals that could help to address this situation.
- Claim Clarity – the PTO has implemented new training programs for examiners and judges relating to “functional claims“, which have been widely criticized as overly broad and unclear. The PTO also highlighted an upcoming pilot program involving the use of glossaries in patent specifications to clarify claim language. The details of this program remain to be seen, but anything that will bring greater consistency and rationality to claim interpretation can only help.
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Examiner Technology Training – One perceived problem with the patent examination system is the inability of examiners to keep up with rapidly changing technologies. Gaps in technical knowledge can result in examiners’ failure to identify relevant prior art, to appreciate the interaction of different system elements, and to make cogent assumptions and conclusions about inventiveness, anticipation and nonobviousness. To address this issue, the Administration has called for private sector volunteers to provide state-of-the-art technical training to patent examiners through a program coordinated by the PTO. This is clearly an area in which the private sector can help to solve a known weakness in the patent system. Several private sector entities have already committed to participate in this project. For example, The Clearing House, a financial services industry association, has pledged to develop educational materials and offer seminars to examiners in the area of financial infrastructure technology, and Verizon, which has already begun to train PTO examiners in the areas of network architecture and communications, will continue these efforts.
While commitments such as this are a welcome start, important details will likely need to be worked out as this program grows. Though examiners work in specific art units, they must still cover a wide range of products and technologies. In complex and fast-moving fields, one could easily see some examiners spending virtually all of their working hours being trained. Moreover, one can envision competition among businesses to “educate” examiners regarding their competitors’ product lines without providing a balanced or realistic survey of the field. Accordingly, the PTO will need to exercise some oversight regarding both the scope and content of this program, and to ensure that whatever training is provided is likely to enhance the patent examination system, rather than burden or bias it.
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Crowdsourcing Non-Patent Prior Art – Perhaps the most interesting and ambitious announcement made last week was the Administration’s call for the private sector to disclose and share prior art. The problem of non-patent prior art is a real but difficult one. It goes without saying that patent examiners examining an application should seek prior art relevant to the claimed invention from whatever sources are available. Traditionally, examiners have focused primarily on prior art contained in other patents and patent applications. While patents and patent applications are admittedly easy to search, this technique is sure to miss relevant art that has not been included in patent applications. In fast-moving industries such as software, it is likely that most of the relevant art is contained in “non-patent literature” (NPL). Yet NPL is notoriously difficult to search, particularly outside of the biosciences in which scientific publications are regularly reviewed and cited by examiners. In the software arts, NPL could include old product brochures, documentation manuals, technical drawings, and obsolete code. Even finding, let alone analyzing, prior art from this diffuse and heterogeneous mass of information presents a daunting challenge.
The problem of NPL has been understood for some time, and “crowdsourcing” of prior art searching has long been viewed as a potential solution. In 2007, the PTO announced its pilot “Peer to Patent” program, which was intended to recruit members of the public to submit prior art relevant to applications under review, initially in the areas of software and business methods. The program was funded by a number of large companies and received a reasonable amount of press coverage, both favorable and unfavorable. The initial pilot program ran from 2007-09, with a second pilot from 2010-11. Perhaps it was the enactment of the America Invents Act in 2011, with its battery of new pre-grant challenge mechanisms, or the difficulty in finding qualified volunteer peer reviewers in highly specific technology categories, but the Peer-to-Patent project has quietly faded into oblivion.
The Administration’s current “crowdsourcing” approach is different, in that it calls directly on companies, the repositories of most NPL, to help. It is encouraging that a number of private firms have already answered the Administration’s call and pledged to make large quantities of previously non-public technical material available to the PTO. To date, pledges to this effect have been made by:
- The Clearing House (to provide the PTO with access to documents describing the national financial infrastructure),
- Microsoft (to provide PTO with access to more than 10 million archived Microsoft technical documents),
- SAS (to provide 38 years of user documentation and technical papers to IP.com, working in conjunction with the PTO), and
- Yahoo (to continue to share prior art relevant to its business).
The amount of data contained within the private coffers of the world’s technology companies is mind-boggling; and collecting, formatting and presenting this data in a cost-effective manner that is useful to patent examiners could prove to be a monumental task. Nevertheless, the effort must be undertaken if patents will continue to be issued in fast-moving technology fields. Google, the world’s largest search engine, has started down this path with its Prior Art Finder, an outgrowth of the popular Google Patent Search launched in 2006. The Administration’s leadership in this area is to be commended, and one can only hope that many more companies will follow those who have already pledged to assist with this vital project.
- Patent Pledges? – It is notable that both the Examiner Technology Training and the Crowdsourcing Prior Art programs announced last week rely heavily on voluntary engagement by the private sector. The Administration has called upon industry to take a leading role in addressing some of the problems that have emerged in the patent system. This approach is sensible, as the technological expertise necessary to evaluate patents in complex and rapidly evolving technical areas resides within the companies that create those technologies, not in the PTO. However, such calls to action are also risky. What if they are ignored, or too few companies heed the call? Governmental calls to action have been around since the Crusades and have recently sought to address social issues from healthy eating and blood diamonds to financial reform and climate change. Over the past few years, spurred by the increase in PAE litigation, among other things, companies have begun to make voluntary pledges relating to patents. These have included pledges not to assert patents, or not to seek injunctions, against standardized technologies and common technology platforms, to charge royalties that are fair, reasonable and non-discriminatory (FRAND), to refrain from transferring patents to PAEs, and a variety of other activities. As I have written elsewhere, these pledges are intended to assure the market that the pledgor’s patents will not be used to disrupt valuable social activity. The recent pledges made in response to the Administration’s call are of a slightly different variety. Rather than impose “negative” encumbrances on the pledgor’s patents or its ability to enforce them, they create “positive” obligations on the pledgors to contribute knowledge, technology and (presumably) trade secrets to the PTO and/or the public. These new positive patent pledges are an intriguing and potentially game-changing development, and it will be interesting to see how many additional companies elect to commit themselves in this manner. I oversee a project at American University that catalogs patent-related pledges made outside formal standards-setting organizations, and look forward to adding many new commitments from the private sector in response to the Administration’s latest call.
Patent Pro Bono/Pro Se Assistance – Another of the new initiatives announced last week relates to the allocation of “dedicated educational and practical” PTO resources to help pro se (unrepresented by counsel) patent applicants navigate their way through the patent application process. Presumably this means that better documentation, explanatory screens and improved help resources will be made available on the PTO web site, all of which would be useful additions. The Administration also called for private sector volunteers to offer increased pro bono (free) legal assistance to small inventors. While these initiatives are welcome, the vast majority of U.S. patents are filed by businesses that can comfortably afford patent counsel, and the Edisonian conception of the sole inventor has been show largely to be a myth. Thus, while politically appealing, it is not clear that these initiatives will have a meaningful impact on the market or the patent system overall.
One wonders, in fact, why the PTO’s pro bono program is limited to patent prosecution, a relatively inexpensive legal task in the grand scheme of things. Perhaps this program would be more useful, and more aligned with the Administration’s other initiatives, if the pro bono program made lawyers available to advise retailers, small businesses and non-profit organizations about how to respond to PAE patent demand letters. While the analytics and information provided through the new PTO patent litigation toolkit are a gold mine for academics and patent litigators, it is not clear that members of the lay public will be able to make effective use of them without professional legal assistance. The PTO’s pro bono program could nicely fill this gap and make the most of the electronic tools that have already been developed and deployed by the Administration.
Conclusion – There are problems with the U.S. patent system. Rather than avoiding them, the Administration has taken positive and productive steps toward addressing them. While the long-term benefits of some of these initiatives are uncertain, programs such as the PTO’s solicitation of non-patent prior art and enhanced technical training for patent examiners could yield meaningful benefits for the system. The companies that have already pledged their support of these initiatives deserve to be commended. Let’s hope that both the Administration and the private sector follow-through on these promising first steps.
285 at the Supreme Court
Dennis has a great summary on the main page. We had a debate here a while back where my view was the First Amendment was irrelevant. I think the Supremes agree:
MR. PHILLIPS: Well, I have no doubt that Congress could well, I’m not sure about in all cases.
JUSTICE SCALIA: I mean, if it can do that, there’s certainly no First Amendment problem.
MR. PHILLIPS: Well, I’m not sure I concede that in all cases. I do think in the run of the mill cases, but when you’re talking about a situation where the assertion is that the conduct of the litigation, the bringing of the litigation itself is inappropriate
JUSTICE SCALIA: That’s an English rule. It used to be our rule. I don’t see how you can possibly say that it’s unconstitutional to make the loser pay.
JUSTICE KENNEDY: This is not your best argument. (Laughter.)
MR. PHILLIPS: It is not my best argument, I appreciate that.
Supreme Court on Fee Shifting – A review of Oral Arguments in Octane Fitness and Highmark
By Dennis Crouch
Octane Fitness v. Icon Health & Fitness (SCOTUS 2014); Highmark v. Allcare Health Mgmt. (SCOTUS 2014) (Transcripts: HighmarkTranscript; OctaneTranscript)
Today, the Supreme Court heard oral arguments in the paired fee-shifting cases of Octane Fitness and Highmark that focus on the proper standard for an exceptional case finding by a district court under 35 U.S.C. § 285 and the proper standard of review on appeal. In Octane Fitness, petitioner asks the Court to lower the standard for proving an exceptional case. In Highmark, petitioner asks for deference to lower court exceptional case findings. In both cases, the Federal Circuit sided with the patentees who lost their infringement actions. In Octane Fitness, the Federal Circuit confirmed that the case was not “exceptional” while in Highmark, a divided Federal Circuit reversed an exceptional case finding based upon a de novo appellate review that gave no deference to the district court’s finding that the lawsuit was objectively baseless.
In the U.S., each party to litigation ordinarily pays its own attorney fees regardless of the case outcome. In the patent litigation context, this changes as 35 U.S.C. § 285 provides an avenue for awarding “reasonable attorney fees to the prevailing party” in “exceptional cases” at the discretion of the lower court. However, discretion only goes so far, and the Federal Circuit’s standard for classifying an “exceptional case” has been critiqued as too rigid, tough, and pro-patentee.
The first case heard today was Octane Fitness. Arguing on behalf of Octane, Rudy Telscher’s main focus was on moving the away from the “objectively baseless” standard to something that is easier for a successful defendant to prove. However, the debate quickly descended into a theoretical discussion of the proper adjective – moving between whether the case was “meritless;” “objectively meritless;” “without substantial merit;” “low likelihood of success;” “unreasonable;” “unreasonably weak;” “a little bit lower than [the Rule 11] standard” and “something more than frivolous.”
Justice Scalia helped cut through the problem somewhat by noting that really what Octane is seeking is a totality of the circumstances test:
JUSTICE SCALIA: Mr. Telscher, it occurs to me that you really cannot answer the question of what adjectives should be attached to “meritless.” And the reason you can’t is, since it is a totality of the circumstances test, that is only one factor and it doesn’t have to be an absolute degree of meritlessness. Even in a I assume you would say that even in a very close case, if there has been outrageous litigation abuse by the other side, the court would be able to say: My goodness, I’ve never seen lawyers behave like this. You’re going to pay the attorneys’ fees for the other side. Couldn’t the court do that?
MR. TELSCHER: That’s absolutely correct, your Honor.
JUSTICE SCALIA: So then how can we possibly define “meritless”? We can’t, because it goes up and down, even in a case where it’s a close case. It could still be exceptional.
MR. TELSCHER: It’s the degree of the unreasonable nature of the case as one factor.
And, in this sense, Octane agrees with the US Government that fees should be awardable whenever the totality of the circumstances indicates that fees are “necessary to prevent gross injustice.”
In a colloquy with Justice Kagan, Octane identified what it sees as a non-exhaustive list of factors to be considered, including (1) whether the case is meritless; (2) bad faith; (3) litigation misconduct; (4) other equitable considerations; (5) anything else that “bears on the gross injustice and uncommon nature of the case.” In addition, Octane argued that the fact that the patentee “never made a product under [the] patent” should be considered as well. Arguing for the U.S. Government, Roman Martinez added that advancement of “objectively unreasonable legal arguments” should also be considered as a factor and, in its own, sufficient for a finding of exceptional case. In his summary, Mr. Telscher did a nice job of summing this up as saying that the exceptional case question is really about “how extreme” the conduct needs to be before it is considered exceptional.
One difficulty is that the Justices had difficulty squaring this laundry list of potentially sufficient factors with the legislative history that the statute is designed to prevent “gross injustice.” In the eyes of the justices (or at least in their questions), gross injustice seems to suggest something more serious than these more mundane factors. Although both parties and the US Government agree that the “exceptional case” standard should follow a gross injustice standard, Justice Scalia offered a predictable negative outlook on that standard since its establishment is largely based upon legislative history.
Ordinarily, the Supreme Court gives no deference to appellate court decisions. However, here Chief Justice Roberts jumped into the debate to consider the role of deference to the appellate panel in this case based upon the congressionally mandated role of the Federal Circuit in unifying patent law.
CHIEF JUSTICE ROBERTS: [W]hy shouldn’t we give some deference to the decision of the Court that was set up to develop patent law in a uniform way? They have a much better idea than we do about the consequences of these fee awards in particular cases. And since we’re just as Justice Kennedy pointed out dealing with adjectives, you know meritless, frivolous, exceptional why don’t give some deference to their judgment?
MR. TELSCHER: Well, I think we need to look at the basis of the judgment.
On that point, the Government responded favorably to the idea that the Federal Circuit could be given deference on some issues, but the internal inconsistencies on this particular issue mean that deference doesn’t make sense here:
MR. MARTINEZ: I think if the Federal Circuit had had a consistent view over its history or if the Federal Circuit were not internally divided on this issue, that may be a consideration. Deference might be more appropriate. But here there is no consistent history and the Federal Circuit, as we’ve seen in Kilopass, is divided.
Here, Chief Justice Roberts may be considering whether the Federal Circuit should be thought of more like an expert agency who would receive some amount of deference for its rulemaking (i.e., precedential decisions).
In the oral arguments, Justice Alito attempted to focus in on exceptionality and noted that, for most district court judges, all patent cases are unusual and – as such – may have no basis for determining whether a particular case is exceptional as compared with the ordinary patent case.
An important issue in the Octane fitness case that was only subtly discussed is also whether clear-and-convincing evidence is required to prove an exceptional case or is a preponderance of the evidence sufficient.
Carter Phillips argued on behalf of the respondent here; arguing that – absent other misconduct – that the case must have been “objectively baseless” in order to be deemed exceptional under Section 285.
One interesting aspect of the decision focused on the applicability of the Supreme Court’s decision in Prof’l Real Estate Investors v. Columbia Pictures Indus.,508 U.S. 49 (1993) and Noerr immunity.
MR. PHILLIPS: Well, I think you could argue that there is at least a First Amendment concern that’s in here;
CHIEF JUSTICE ROBERTS: First Amendment concern, what, to bring a patent case?
MR. PHILLIPS: Well, access to the courts, access to the courts. Any time you talk about imposing multimillion dollar fee awards at the end of the litigation, particularly if you do it on a fairly arbitrary basis.
JUSTICE SCALIA: Do you think Congress could not require the loser to pay in all cases?
MR. PHILLIPS: Well, I have no doubt that Congress could well, I’m not sure about in all cases.
JUSTICE SCALIA: I mean, if it can do that, there’s certainly no First Amendment problem.
MR. PHILLIPS: Well, I’m not sure I concede that in all cases. I do think in the run of the mill cases, but when you’re talking about a situation where the assertion is that the conduct of the litigation, the bringing of the litigation itself is inappropriate
JUSTICE SCALIA: That’s an English rule. It used to be our rule. I don’t see how you can possibly say that it’s unconstitutional to make the loser pay.
JUSTICE KENNEDY: This is not your best argument. (Laughter.)
MR. PHILLIPS: It is not my best argument, I appreciate that.
On the other hand, if you if you go back and look at Christiansburg. In that case the Court also didn’t treat it as a First Amendment issue, but it still recognizes an important policy of trying not to have too much interference with access to
When Justice Breyer entered the argument, he implicitly pushed Mr. Phillips to recognize that the USPTO has issued many bad patents but that the associated presumption of validity of the patents is a setup that makes it very hard to show a case is objectively baseless even when it is pretty clear that a patent is invalid. Philips responded simply that the filing of a frivolous claim should be seen as objectively baseless and that the present case was not such a case.
Phillips also gave his talk on how the “patent troll” debate is really nonsense and that there is nothing to see here:
MR. PHILLIPS: First of all, as I say, the plaintiff this you know, there’s a reason why you don’t see advertisements on television when Saiontz & Kirk says, If you think your patent has been infringed, call us. Why? Because there’s not a long line of people who can bring plaintiffs’ patent cases. They are expensive to litigate, and the ultimate effect and you have to get an expert, and at the end, you put your patent into validity [risk].
Apart from that, however, the court did not appear to focus on the “troll” issue in any depth.
= = = =
The Highmark argument came immediately following that of Octane Fitness. The second cases focuses on the standard of appellate review for the objectively baseless question and so, obviously depends upon the outcome in Octane Fitness. Certainly, if the court moves toward a “totality of the circumstances test” then more deference would be given to district court judges in their determination. That makes Highmark the trailing decision here and likely less important.
Neal Katyal argued on behalf of petitioner Highmark who is asking the court to give deference. Katyal is a former Acting Solicitor General of the US and also brother to Fordham Law School IP Professor Sonya Katyal. The basic argument that whether or not the party’s position is reasonable is a question of fact that, once decided, should be given deference on appeal. The US Solicitor’s office also supported Highmark here arguing for deference. Don Dunner argued on behalf of the respondent here
New 101 case… scares me…
I’m sure Dennis will do his usual magic, but Cyberphone Sys., LLC v. CNN Interactive (Fed. Cir. Feb. 26, 2014) is a prime example of the silliness of this judicial activism. The case is available here.
Here is the claim:
A method, comprising:
obtaining data transaction information en- tered on a telephone from a single trans- mission from said telephone;
forming a plurality of different exploded data transactions for the single transmission, said plurality of different exploded data transaction[s] indicative of a single data transaction, each of said exploded data transactions having different data that is intended for a different destination that is included as part of the exploded data transactions, and each of said exploded data transactions formed based on said data transaction information from said single transmission, so that different data from the single data transmission is separated and sent to different destinations; and
sending said different exploded data transac- tions over a channel to said different desti- nations, all based on said data transaction information entered in said single trans- mission.
What’s my gripe? First, the court says Section 101 “impliedly bars” certain subject matter. I won’t bore you by repeating the post below about the plain language and legislative history of that section, which shows no such language or intent.
More importantly, because the method claim — which expressly recites physical objects — “involves an abstract idea,” the court says section 101 is implicated. The “abstract idea” is “using categories to organize, store, and transmit information.”
Okay… but someone identify for me a method claim that does not “involve” an abstract idea (or mental step or natural phenom or natural law or…).
Now, because the claim “involves” an “abstract idea,” the court says that it’s not enough that this abstract idea can’t be performed by a human being. Instead, the court concludes that the claim covers the practical idea itself even though the claim is limited to organizing data and so on using telephones. Why? In part because you can use pretty much any telephone.
Okay… so what method claim is eligible? If it “involves” an abstract idea (whatever that is), and uses “conventional” things, nope. Even if it changes the world… not eligible.
This sort of “reasoning” is not very helpful.
Federal Circuit: Enablement More Difficult When Invention Faces Skepticism
By Dennis Crouch In re Hoffman (Fed. Cir. 2014) (non-precedential decision) Gene Hoffman and David Lund’s patent application is directed to method of weakening the strength of tropical cyclones by delivering super-coolant from an aircraft into the eye of the hurricane. The inventors here have never tested their method, but did provide some preliminary calculations that – they argue – suggest success. 
The USPTO rejected the application for failing to enable the claimed invention under 35 U.S.C. 112(a). In particular, the examiner identified three failures: (1) the preliminary calculations contained unexplained assumptions and mathematical errors; (2) the specification noted a need for experimentation to determine the proper amount of coolant to add and the optimal strike time; and (3) a number of weather scientists have expressed doubt as to whether similar approaches would work. In reviewing the rejection, the PTAB affirmed and that decision (rejecting the application) has now been affirmed on appeal. Pending claim 36 is identified as representative and claims:
A process for disrupting a formed or forming tropical cyclone eye wall or eye or center of lowest pressure comprising:
Introduction of a super coolant chemical agent sprayed with force (the super coolant is stored in a vessel under pressure) and or released from pre-measured containers from an appropriate number of large aircraft to reduce the temperature within the eye wall (top to bottom at sea level),
thereby circulating the super coolant throughout the eye wall by the centrifugal force of the eye wall, alternatively into the eye or center of lowest pressure to reduce the temperature in the eye or center of lowest pressure and the water beneath,
[t]hereby reducing the wind and storm surge of the eye wall or raising the pressure in the eye or center of lowest pressure and converting it back to a tropical rainstorm.
The claim form here does not really follow the standard ordinarily used by professional patent drafters. Here, it appears that claim drafting and prosecution were handled pro-se by the inventors. For more than 150 years, patent law has been seen as an arcane area of law full of traps for non-experts. In some ways, this decision confirms that tradition. The first sub-section of 35 U.S.C. § 112 requires that the patent document disclose enough about the invention so as to enable an artisan skilled in the particular area of science and technology to make and use the invention. The statute reads:
[The patent must disclose] the invention, and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same.
35 U.S.C. §112(a). The court has added some gloss to the statute in that precedent allows missing elements from the specification so long as the skilled artisan could fill-in those gaps without undue experimentation. The court also uses the “Wands factors” to help determine whether the disclosure meets the enablement standard. These factors include:
- The quantity of experimentation necessary,
- The amount of direction or guidance presented,
- The presence or absence of working examples,
- The nature of the invention,
- The state of the prior art,
- The relative skill of those in the art,
- The predictability or unpredictability of the art, and
- The breadth of the claims.
In re Wands, 858 F.2d 731 (Fed. Cir. 1988). In applying these, the Federal Circuit found that there was no doubt that the USPTO’s decision was correct. Although the court did not go into depth in its analysis, one interesting aspect of the decision is that the Federal Circuit identifies skepticism in the scientific community as the most important factor here. The court writes:
And perhaps most significantly, the very efficacy of the method itself is subject to considerable doubt in the scientific community.
In other words, the enablement burden is more difficult to meet when the invention is surprising or when it goes against conventional wisdom. Of course, those same inventions will more easily surpass the central patentability test of non-obviousness. My point here, though, is that patentees with clearly groundbreaking inventions should take extra pause to ensure that the surprising result has been properly enabled.
More USA Jobs
US Department of Justice has two vacancies for IP litigators to primarily handle § 1498 defense:
The Intellectual Property Staff of the Commercial Litigation Branch, primarily defends the United States against allegations of patent and copyright infringement in the United States Court of Federal Claims and the United States Court of Appeals for the Federal Circuit. The Branch occasionally represents the Government in a variety of proceedings before the Patent and Trademark Office, the district courts, and the courts of appeals.
https://www.usajobs.gov/GetJob/ViewDetails/360379300.
PTAB continues to hire, and is looking for a Vice Chief: https://www.usajobs.gov/GetJob/ViewDetails/362535800
The Federal Circuit is hiring a new Deputy Chief Clerk: https://www.usajobs.gov/GetJob/ViewDetails/362474500
More About the OED Jurisdictional Reach
Blogged below, the OED in recent years has reversed the position it took in 1985 about the scope of its rules, emphasizing that, now, they apply to even conduct that has nothing to do with practice before the Office. Let me parse through some of the issues this creates, and I no doubt will do more later.
The first one is a due process issue. A lawyer should be on notice that the USPTO rules apply to his conduct, no matter what. Given the adoption of Section 10.1 (discussed in the earlier post), and repeated formal responses during the notice & comment period in adopting the 1985 rules, that notice seems lacking. Statements by the OED director in speeches probably aren’t enough, I’d say.
The due process issues are much, much deeper, however. A recent case helps explain why. The USPTO, like (I think) every state, allows for “reciprocal discipline.” This means that if, say, Texas brings a disciplinary case against me, and I’m found guilty (or agree to guilt), the USPTO could (if I were registered, but I’m not) discipline me, too. I could avoid reciprocal discipline only by a sticking too a few very narrow paths above the reciprocal discipline chasm. See Selling v. Radford, 243 U.S. 46 (1971); 37 C.F.R. 11.24(d)(1).
One path requires showing that the state proceeding against me lacked due process. Matter of Brufsky, Proc. No. D2013-12 (USPTO OED Feb. 2, 2014). Among other things, due process requires that the lawyer have notice of the charge against him, have the opportunity to present evidence, testify, cross-examine witnesses, and present argument. Id.
Showing a lack of due process is a pretty tall order where the state has good attorney-disciplinary procedures in place and follows them. The lawyer in Brufsky tried and failed.
Now switch things to what the OED director has said lately — that the USPTO can discipline a lawyer when the conduct has nothing to do with practice before the Office. The OED director’s slides recount a case where a lawyer got sanctioned for discovery violations and that resulted in discipline — by an agreed order — of the lawyer by the OED for violating one of its rules. See In re Hicks. Can the USPTO apply Selling to this set of facts?
I’d say no. Unfortunately, Hicks was an agreed case (because the client wanted to avoid fighting — more on that below), but the OED order reads as if fact-findings made under Rule 37 and statements made by the Federal Circuit about his brief being misleading were sufficient.
First, there was no notice (I’d say) that Hicks had notice that his conduct could subject him to anything except the sanctions specifically authorized by Rule 37 for a discovery violation. Further but in this regard, even if he was on notice that he might be disciplined, a lawyer representing a client before a tribunal (in my hypo, the court hearing the car wreck case) is, ordinarily, required to follow only the tribunal’s ethical rules. So, Hicks had notice only that he was subject to discipline for violating whatever rules that federal court had chosen. Consequently, for due process to be met, the OED would have to show that Hicks had violated a rule applicable in federal court (probably the forum state’s rules). The agreed order refers only to the USPTO Rules.
Second, so far as I’m aware a lawyer faced with a Rule 37 motion can’t take the deposition of opposing counsel or other witnesses, or cross-examine anyone. There’s usually no live hearing on a Rule 37 motion — maybe oral argument.
Third, the premise of Selling and the USPTO regulations is that a proceeding occurred where the lawyer knew that discipline was a potential remedy. That’s not often the case in Rule 37 motions.
So, just something to chew on.
Friday, speaking in San Antonio on a generalized ethics symposium, but I’m speaking about prosecution bars and the role that ethics rules should play in informing their scope. I’m betting a dollar no one will have a clue what I’m talking about.
Patent Plaintiffs May Welcome More Fee Shifting
By Dennis Crouch
Semcon Tech LLC v. Micron Tech (D. Del. 2014)
A few days ago Judge Richard Andrews wrote the following order in this case:
The request for oral arguments is denied. Micron’s position is meritless, and I am surprised that micron’s distinguished Delaware counsel did not talk lead counsel out of its opposition to the motion.
[Order Lifting Stay]. Semcon’s case against Micron involves the chemical-mechanical polishing and planarization used in semiconductor wafer manufacturing. U.S. Patent No. 7,156,717. Earlier in the litigation, the parties in the action agreed to a stay of the litigation pending outcome of parallel cases involving the same patent against Applied Materials. In December 2013 that case was voluntarily dismissed as part of a settlement agreement between Semcon and Applied Materials. Semcon then repeatedly sought to meet and confer with Micron’s opposing counsel from Weil Gotshal regarding re-opening of the case, and then eventually filed a motion to lift the stay.
In its opposition to the motion, Micron‘s attorneys argued that the stay should never be lifted and never be reopened. That tidy conclusion was a simple matter of logic: (1) The stay order set in place by Judge Andrews stated that it would be in place “until such time as a final, non-appealable judgment is entered in the Semcon v. Applied Materials Suit.” And, (2) no final judgment was entered in the Applied Materials case but rather the case was merely subject to a voluntary dismissal without prejudice by Semcon. According to Micron’s attorneys, for the stay to be lifted, Semcon must re-file its lawsuit against Applied Materials and litigate that case “to a final, nonappealable judgment. . . . Until that occurs, however, the stay should remain in place to preserve efficiency and economy.”
Of course, the court saw Micron’s argument as too clever and has ordered the case reopened. I suspect that Semcon will next move for some amount of Rule 11 fees.
Micron has an interesting reputation in the patent sphere. In 2011, the company stopped hiring University of Illinois engineers because the university had sued Micron for patent infringement. The company also has an (apparently) ongoing back-end deal with Round Rock to enforce more than 1,000 of its patents.
A few days ago, I wrote about defendants behaving badly and whether there are clear examples of that occurring. Although admittedly biased, patent plaintiff IP Nav (Erich Spangenberg) has an put together an interesting essay on the topic of fee shifting. See Patent Lawsuit Defendants Behaving Badly. The essay explains why IP Nav can be happy with a fee shifting rule – as long as it is balanced so that he can collect fees against defendants who engage in willful infringement, make meritless arguments in court, and needlessly drag-out litigation. The essay also highlights a few examples such as Takeda Chemical v. Mylan Laboratories (attorney fee award of $16.8 million to the patentee Takeda because Mylan’s obviousness argument was “so devoid of merit and so completely fail[ed] to establish a prima facie case of invalidity that it must be described as `baseless.'”) and Beckman Instruments, Inc. V. Lkb Produkter Ab. (Attorney fees for the patentee Beckman for defendant’s vexatious litigation).
On Wednesday of this week, the Supreme Court will be hearing oral arguments in the two pending fee shifting cases Highmark and Octane Fitness.
Federal Circuit: Patent Case May be Transferred to Court with No Personal Jurisdiction over Plaintiff
By Dennis Crouch
elcommerce.com v. SAP (Fed. Cir. 2014)
In a prior post, I discussed the important means-plus-function issues arising from this case. Here, I focus on the separate issues of jurisdiction and venue.
Elcommerce first filed its lawsuit in the Eastern District of Texas (TX Court). Subsequently, SAP moved for a transfer of venue to the Eastern District of Pennsylvania (PA Court). SAP’s headquarters is located within the EDPA and the district court granted the § 1404 transfer motion. On particular concern raised by elcommerce was that it had no ties with Pennsylvania and that, as a consequence, PA Court had no jurisdiction over it as plaintiff. Both the district court and the Federal Circuit rejected that argument.
The statute provides that “For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought.” 28 U.S.C. § 1404(a). Here, it is clear that the case could have been brought in PA Court since that is SAP’s headquarters and, according to the Federal Court, that settles the matter.
Here, in the first-filed Texas case there was personal jurisdiction over both the plaintiff elcommerce and the defendant SAP, and elcommerce as plaintiff was subject to the declaratory counterclaims filed by SAP in Texas. This jurisdiction was preserved when the entire action was transferred to Pennsylvania under §1404(a).
The court previously found this same result in the case of In re Genentech (Fed. Cir. 2009). There, the court stated that “[t]here is no requirement under §1404(a) that a transferee court have jurisdiction over the plaintiff or that there be sufficient minimum contacts with the plaintiff.”
Means-Plus-Function: Invalidity Needs Expert Testimony
By Dennis Crouch
elcommerce v. SAP (Fed. Cir. 2014)
Facing another functional claim limitation case, the Federal Circuit here vacated the lower court holding that the means-plus-claims were invalid as indefinite for failing to teach sufficient corresponding structure in the patent specification. Particularly, the court here holds that, in this case, attorney-argument was insufficient to prove invalidity and rather than some amount of extrinsic evidence (such as expert testimony) was necessary to provide the necessary clear-and-convincing evidence.
Patent claims ordinarily recite particular “structure, material, or acts” as elements that both provide for the requisite inventive step and also materially limit the scope of rights. However, since 1952 the patent act has provided an express avenue for drafting patent claims using functional – instead of structural – limitations. Under 35 U.S.C. §112(f), a claim element “may be expressed as a means or step for performing a specified function without the recital of structure, material, or acts in support thereof.” To a lay reader, these means-plus-function claims appear quite broad. For instance a claimed “means for connecting elements A and B” seemingly covers any method or structure that accomplishes the claimed function. However, the statute itself requires that means-plus-function claims be given a much more limited scope. That is, the statute goes-on to say that a means-plus-function claim “shall be construed to cover the corresponding structure, material, or acts described in the specification and equivalents thereof.” Id. Thus, to know the meaning of a claimed “means for connecting,” we must look to the patent specification to see what particular connecting mechanisms were disclosed and the scope of the claim would be limited only to those disclosed structures and their equivalents. The result here is that means-plus-function claims typically have a scope that is much narrower than one might expect on the initial reading.
In recent years, a substantial number of means-plus-function claims have been invalidated as lacking definiteness under § 112(b). (I.e., invalid as indefinite). Courts follow the following logic: (a) The statute requires that a means-plus-function element be defined according to corresponding structure found in the specification; (b) If no corresponding structure is found in the specification then the term cannot be defined and (c) is therefore invalid as indefinite.
In this case, the asserted claims are directed to a system for monitoring a supply chain. Representative claim 37 in the case has nine-different means claim elements, such as a “means for monitoring” supply data; “means for extracting” supply data; “means for translating” the data into a common format; etc. As part of its claim construction, the district court found that the specification failed to include any structure for any of the claimed means and subsequently, that the claims were invalid and indefinite. One problem with the district court’s analysis is that it doesn’t come to terms with the reality that “structure” is to be seen in the eyes of one skilled in the art.
Now, the standards applied here are quite messy. We know that patents are presumed valid and, in Microsoft v. i4i, the Supreme Court explained that presumption may only be overcome with clear and convincing evidence. In a concurring opinion, Justice Breyer (joined by Justice Scalia) raised the point that the clear-and-convincing standard ordinarily applies to factfinding and questions of fact and not to questions of law. Justice Breyer writes: “Where the ultimate question of patent validity turns on the correct answer to legal questions—what these subsidiary legal standards mean or how they apply to the facts as given—today’s strict standard of proof has no application.” Ignoring that advice (sub silento), the Federal Circuit has ruled that indefiniteness must be proven with clear and convincing evidence. See TecSec, Inc. v. IBM, 731 F.3d 1336 (Fed. Cir. 2013)(Linn, J.). That conclusion draws its foundation from the 1987 Panduit decision stating that the presumption of validity is applicable to all validity challenges. Panduit v. Dennison, 810 F.2d 1561 (Fed. Cir. 1987) (Markey, J.). Drawing-in the claim construction issue, by statute, identifying the “corresponding structure” of a functional element is a claim construction issue. Such an element “shall be construed to cover the corresponding structure.” And, as patent litigators are well aware, claim construction is also a question of law.
In her opinion, Judge Newman does not address any of the aforementioned conflict except for the requirement that indefiniteness be judged with clear and convincing evidence. With that framework, the opinion notes that the only way “a general purpose judge could ascertain the position of persons of skill in the art and conclude that there is not a shred of support for any of the eleven interrelated means-plus-function claim limitations. . . . The burden was on SAP to prove its case, and in the absence of evidence provided by technical experts who meet the Daubert criteria there is a failure of proof. Attorney argument is not evidence.” Here, Judge Newman’s statement regarding “not a shred of support” goes beyond the clear-and-convincing standard, but her point is made – expert testimony is necessary here.
To be clear, the Federal Circuit does not expressly hold that expert testimony is always required. We do not of course hold that expert testimony will always be needed for every situation.” However, the court does not provide any explanation of when it might not be necessary.
In prior cases, the Federal Circuit has held that claim construction and indefiniteness findings can be made without expert testimony. See, e.g., Noah Systems, Inc. v. Intuit Inc., 675 F.3d 1302 (Fed. Cir. 2012); Default Proof Credit Card Sys., Inc. v. Home Depot U.S.A., Inc., 412 F.3d 1291, 1302 (Fed. Cir. 2005). The majority does not address these prior precedents. However, Judge Wallach does in his dissenting opinion.
The issue in this case is whether expert testimony is required to prove indefiniteness of a means-plus-function term when the specification contains no corresponding structure. This court answered “no” in Noah, explaining that expert testimony is not required where the specification contains no algorithm corresponding to each recited function. When there is an identifiable algorithm, however, expert testimony may be helpful in determining whether the algorithm is adequate corresponding structure in the view of a skilled artisan. Id. . . .
Indeed, indefiniteness is part of claim construction, both of which are questions of law. . . . Just as there is no requirement for expert testimony when construing means-plus-function claims to cover the corresponding structure, expert testimony is not needed to hold the claims indefinite when no structure is disclosed.
Judge Wallach’s point parallels what I discussed above – that these are questions of law where expert testimony does not appear to be a requirement. However, his perspective also appears lacking because he essentially ignores the requirement that these questions be viewed from the standpoint of one of skill in the particular area of technology.
Webinar on Functional Claiming
On Thursday Feb 27, I’ll be participating in my first IPO Webinar hosed by Pamela Sherrid. The event begins at 3PM ET and will focus on the hot topic of “Functional Claiming.” $130 per user per webinar. Register here: http://www.ipo.org/IPChatChannel/. Also on the panel are Stephen Durant of the Schwegman firm and Abran Kean of Erise IP. — Dennis Crouch
Deserving of Attention: The Proposed Abrogation of Civil Rule 84 & the Official Forms
Guest post by Professor Brooke D. Coleman. (Ed: Professor Coleman is not a patent scholar, but instead focuses her attention generally on civil procedure. I asked her to write this guest post on the form-complaint issue from that perspective. – Dennis).
In the land of civil procedure, we tend to get very excited when the Federal Rules of Civil Procedure are amended. As proceduralists, however, we are accustomed to expressing our enthusiasm amongst ourselves. Procedure can be a lonely endeavor—especially when it comes to the Rules and the Federal Rulemaking process. However, the current proposed amendments to the Civil Rules are receiving far more attention than usual. The Committee on the Federal Rules of Practice and Procedure of the Judicial Conference has proposed amendments to the discovery rules. These amendments have been controversial, receiving over 2000 comments during the recently-extended public comment period and getting extensive coverage on blogs and in editorials.
Yet, lost in the buzz around the discovery rules is another critical proposed change—the abrogation of Rule 84 and the Forms. (This is where one might start to think that the lone nature of procedure is a good thing, but trust me, it gets interesting.) Rule 84 provides that the forms included in the appendix to the Civil Rules are both illustrative and sufficient under the rules. The forms themselves have been a part of the Civil Rules since the rules were originally adopted in 1938. The Rulemaking Committee has grown concerned about these forms, however, because recent cases have called the validity of the forms into question. For example, some have argued that Form 11—the form for pleading a basic negligence claim—is no longer valid after recent pleading cases, Twombly & Iqbal. In patent cases, courts have similarly struggled with whether Form 18 is valid. (And, in fact, pending federal legislation may eliminate Form 18 anyway.) In the face of this consternation over the forms, the Committee considered a few possible paths. First, it could leave the forms as is. Second, it could change the forms and bring them in line with current practice. Finally, the Committee could just get out of the form-writing business altogether. It chose the final option.
There are a number of problems with the path the Committee chose. The problem I have focused on is how the Committee has gone about attempting to abrogate Rule 84 and the Forms. As I have argued elsewhere, the Rules Enabling Act process—the process by which the Civil Rules are amended—requires the Committee to change the rules and the forms together. This is because the forms and the rules to which they correspond are one in the same. In order to understand the rule, one must look to the form. Because the rule and form are linked in this way, in order for the Committee to change the form, it must consider and publish both the rule and form together. In this case, the Committee did nothing of the sort. It is deleting Rule 84 and the forms without reference to any of the rules to which those forms correspond.
I argue this is problematic for a few reasons. First, the history of Rule 84 shows that the rules and the forms are linked. The original rulemakers believed the forms were critical. They intended the forms to be the “pictures” that would accompany the rules. Rule 84 has only been amended one time since then. In the early years after the rules were adopted, some courts did not treat the forms as sufficient under the rules. Those courts dismissed cases even when parties followed the form complaints. In 1946, Rule 84 was amended to clarify that the forms were not simply passive indications of what the rules meant. They were instead active illustrations of the rules. The revised language adopted in 1946 is the rule we still have today—it states that the forms suffice under the rules. That the rule was amended to make this clarification demonstrates how the rules and forms are inextricably linked.
Second, rulemaking practice with respect to the forms shows that the rules and the forms are connected. Historically, the forms have only been amended in concert with their corresponding rules. For example, when Rule 4 was amended to add a provision for waiver of service of process, the forms were also amended to abrogate the old service form and add new forms. This example of how the forms are amended is repeated throughout the history of the rules. I reviewed every instance in which a form was amended since 1938. There were only two contexts where a form was amended without amending the rule to which it corresponded. First, forms were amended pursuant to federal statutory change (Congress raising the amount in controversy, for example). Second, forms were amended to make purely technical modifications (changing date designations from 19—to 20—at the turn of the century, for example). In other words, the forms have never been modified in a meaningful way without a corresponding change to the rules.
Finally, there is a current example of how the proposed abrogation of the forms is problematic. As already discussed, Twombly and Iqbal have called the pleading forms into question. Yet, the Court cited Form 11 approvingly in Twombly, and has said nothing about it since. The Rulemaking Committee’s deliberations regarding the forms, and specifically Form 11, demonstrate the amount of confusion those cases have created. But, they also demonstrate how much Rule 8 and Form 11 are linked. In those deliberations, the Committee worried that deleting Form 11 would affect the interpretation of Rule 8 and Twombly and Iqbal. This means the Committee was concerned that deleting Form 11 would change Rule 8. And, that is exactly the problem. If deleting a form changes the rule to which it corresponds, that means the rule and the form must be considered together and, further, it means both the rule and the form must be published for comment.
In short, by not considering and publishing the rules and the forms together, the Committee has violated the Rules Enabling Act process. In addition, its failure to follow the proper course has made this change less noticeable. Lawyers, academics, and judges haven’t focused on how deleting the forms will affect the rules because the proposal—as a simple abrogation of Rule 84—does not indicate the significance of this change. Add in the controversy regarding the discovery rules, and it is easy to see why this rule change has gone relatively unnoticed. Yet, the change the Committee is proposing is a substantial one. It certainly hasn’t gotten the attention it deserves, but let’s hope it does before it is too late.
Brooke D. Coleman is an Associate Professor of Law at the Seattle University School of Law. A draft of her article titled Abrogation Magic: The Rules Enabling Act, Civil Rule 84, and the Forms is available on SSRN.
Patently-O Bits and Bytes by Dennis Crouch
- I am enjoying Carl Oppedahl’s new blog here: http://blog.oppedahl.com/.
- Professors Chisum and Mueller are putting on their top patent law CLE: The Chisum Patent Accademy. This time in Cincinnati in March 2014: Chisum Patent Academy. If you care about your depth of knowledge in of patent law then this will be $2,000 well spent.
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Job postings from the past week:
- GTT Group in Portland Oregon is looking for EE / Computer Science Patent Professionals
- Withrow & Terranova in Triangle Park North Carolina is looking for EE / Computer Science Patent Professionals
- PatentBar International in Boston is seeking patent law professionals with English-Russian language skills
- Hanley, Flight and Zimmerman of Chicago is seeking experienced patent attorneys for its growing practice
- Godfrey & Kahn of Milwaukee is looking for experienced EE/MechE patent attorneys
- Winstead PC of Dallas is looking for a variety of patent law professionals here and here
- Schwegman, Lundberg & Woessner, P.A. is looking for qualified patent attorneys across the country
- Hickman Palermo Truong Becker Bingham Wong LLP is seeking an associate attorney in the Silicon Valley area with experience in computer science related patent prosecution
- Rutan & Tucker has an employment opportunity available for a Patent Agent with a minimum 4 years patent prosecution experience and a background in electrical engineering
- Schaeffler, a global automotive and industrial supplier, is seeking a Patent Paralegal in Wooster, Ohio
Lighting Ballast: Deference Would Have Only Masked the Problems
By Dennis Crouch
In Lighting Ballast, the en banc Federal Circuit once again held that claim construction should be seen as a question of law that is reviewed de novo on appeal. In the end, this is probably a good result for the patent system – but not for any of the reasons given by the court.
Over the years, the high-rate of claim construction reversal has repeatedly been highlighted as a symbolic of problems with the patent system. Some thought that the problem lay in district court failures to conduct proper analyses, but over time, most of us have come to reject that explanation. Rather, my view is that claim construction is a difficult task and it is not surprising that, out of the myriad possible definitions that a term could be given, two courts would disagree on which definition is best. I actually see this issue pointing a spotlight toward a major problem with the patent system – perhaps the largest problem – that patents often fail to provide clear notice of what is and what is not covered by the various claims.
Deference would have only masked the problem. The reversal rate would have gone down and from that high level that traditional off-kilter signal would be missing. The real difference with deference would be that patent scope would be understood as of the district court decision rather than having to wait for an appeal. That may help some litigants, but still it is a fairly ridiculous patent system where the scope of claims are not well understood until determined by a judge.
Rather, the problem has to be addressed by the US Patent Office with a renewed focus on clarity of claim scope. President Obama’s administration has recognized this with their call to “ensure claims are clear and can be consistently enforced.” The rub is that the administration’s approach of (1) encouraging glossaries and (2) providing additional examiner training are unlikely to have any meaningful impact. The good thing then is that the Federal Circuit’s continued power means that these systemic problems won’t be buried.
En Banc Federal Circuit Confirms Cybor: Claim Construction Reviewed De Novo on Appeal
By Dennis Crouch
Lighting Ballast Control LLC v. Philips Electronics N.A. Corp. (Fed. Cir. 2014) (En banc)
In a long awaited decision, an en banc Federal Circuit has reconfirmed the longstanding rule that claim construction is an issue of law reviewed de novo on appeal.
Writing for the majority, Judge Newman summarizes:
For the reasons we shall discuss, we apply the principles of stare decisis, and confirm the Cybor standard of de novo review of claim construction, whereby the scope of the patent grant is reviewed as a matter of law. After fifteen years of experience with Cybor, we conclude that the court should retain plenary review of claim construction, thereby providing national uniformity, consistency, and finality to the meaning and scope of patent claims. The totality of experience has confirmed that Cybor is an effective implementation of Markman II, and that the criteria for departure from stare decisis are not met.
Because of the importance of this issue and the divided court, Supreme Court review is fairly likely. The decision also guarantees that the Court will continue to be the central patent law authority.
The majority decision filed by Judge Newman was joined by five other judges (Judges Lourie, Dyk, Prost, Moore, and Taranto). Judge Lourie wrote a concurring opinion providing “additional reasons” for confirming Cybor. Judge O’Malley filed a dissenting opinion that was joined by Chief Judge Rader and Judges Reyna and Wallach. The six-member opinion carried the day as majority because Judges Hughes and Chen chose not to participate. Even then, a 6-6 tie would have confirmed Cybor but without any clear further precedent.
The majority opinion takes a Socratic approach of poking holes in every argument for changing the rule and in the end concluded that “deferential review does not promise either improved consistency or increased clarity.” And, without some clear reason to change, the default in law should be stare decisis – follow longstanding precedent that, in this case, involves hundreds of appellate claim construction decisions over the past 15 years creating a large body of precedent. The majority writes:
We have been offered no argument of public policy, or changed circumstances, or unworkability or intolerability, or any other justification for changing the Cybor methodology and abandoning de novo review of claim construction. The proponents of overruling Cybor have not met the demanding standards of the doctrine of stare decisis. They have not shown that Cybor is inconsistent with any law or precedent, or that greater deference will produce any greater public or private benefit. We conclude that there is neither “grave necessity” nor “special justification” for departing from Cybor.
The court also walked through post-Cybor policymaking by Congress as well as Supreme Court decisions and found nothing that would undermine Cybor.
[W]e have reviewed the arguments for changing the Cybor procedure of de novo review of claim construction. First, we have looked for post- Cybor developments, whether from the Supreme Court, from Congress, or from this court, that may have undermined the reasoning of Cybor. None has been found, or brought to our attention. There has been no legislative adjustment of the Cybor procedure, despite extensive patent-related legislative activity during the entire period of Cybor‘s existence.
In the end, the Court did not address the particular facts of the case – whether the “voltage source means” should be interpreted under §112p6. The district court said no but the original appellate panel said yes (on de novo review). That appellate panel will carry the day here and the plaintiff loses because the specification did not disclose sufficient structural embodiments of the claimed voltage source means.
“Inventive Concept” and the Hot-Blast Cases
Guest post by Jeffrey A. Lefstin, Professor of Law, University of California, Hastings College of Law
As the Supreme Court prepares to take up Alice Corp. v. CLS Bank, a major question the Court may confront is to what extent an “inventive concept” is necessary for patent eligibility under § 101. In Mayo v. Prometheus, the Court suggested that “conventional and obvious” activity cannot transform a law of nature or abstract idea into a patent-eligible invention. The Court seemingly revived Parker v. Flook, which held that only “inventive applications” of abstract ideas are patent-eligible. But when the Federal Circuit heard CLS Bank, divided as the court was, both Judge Rader and Judge Lourie emphatically rejected the idea that Mayo demands “inventiveness” for patent-eligibility.
In both Flook and Mayo, the Supreme Court anchored the requirement for inventive application in Neilson v. Harford, the famous English case on James Neilson’s hot-blast smelting process. The Court in Flook and Mayo focused on this passage appearing in Baron Parke’s opinion for the Court of Exchequer:
We think the case must be considered as if the principle being well known, the plaintiff had first invented a mode of applying it by a mechanical apparatus to furnaces; and his invention then consists in this—by interposing a receptacle for heated air between the blowing apparatus and the furnace.
Flook took this language to mean that an underlying idea or discovery should be treated as part of the prior art; Mayo took it to mean that a claim is patent-eligible only if the application of a discovery or idea is inventive or unconventional.
However, a reading of the Exchequer’s full opinion tells the opposite story. Neilson’s patent was sustained because his application was entirely conventional and obvious. The defendant’s challenge in Neilson was primarily a scope of enablement argument: Neilson had disclosed that the blast should be heated before introducing it into the furnace, but disclosed next to nothing about the heating means. In refuting the defendant’s challenge, both the patentee and the judges of the Exchequer emphasized that the mode and apparatus for heating air were old and well known in the field, and represented no invention by Neilson.
So why did Baron Parke write that Neilson’s discovery – his ‘principle’ – should be regarded as “well known”? The court was wrestling with the question of whether Neilson had claimed a patentable manufacture, or the abstract principle that hot air was superior to cold. And if a manufacture, was Neilson entitled to reach the accused blast furnace, which employed a different heating apparatus? The Exchequer had faced the same questions seven years earlier in Minter v. Wells, involving a patent to an adjustable chair. The defendant in Minter had argued that the patentee was trying to claim a well-known principle of mechanics: the self-adjusting lever. Alternatively, if the claim was to the chair rather than the principle, the patent should be restricted to the inventor’s particular embodiment. Baron Parke concluded instead that the patentee had claimed the application of the self-adjusting leverage to an adjustable chair. Therefore, the patent was not drawn to an abstract principle, and might extend to other chairs embodying the same application but with a different arrangement.
Minter thereby established that a patent might claim the application of a well-known principle to new ends, and might extend beyond the exact machinery employed by the patentee. In the famous passage from Neilson, Parke was applying the same doctrine to Neilson’s patent – except that Neilson’s ‘principle’ was new rather than well-known. Neilson was a more difficult case because, given Neilson’s minimal disclosure, the scope of enablement was more dubious than in Minter. But a special jury verdict on that point ultimately carried the day for Neilson.
Neilson was only one of some twenty cases asserted by Neilson in England and Scotland. Other decisions following and interpreting Neilson leave no doubt that the case stood not for inventive application, but for the distinction between principles in the abstract and patentable applications. For example, in a case litigated the next year, Househill v. Neilson, the Court of Sessions stated:
The main merit, the most important part of the invention, may consist in the conception of the original idea—in the discovery of the principle in science, or of the law of nature, stated in the patent, and little or no pains may have been taken in working out the best manner and mode of the application of the principle to the purpose set forth in the patent.
Neilson was understood the same way in the Supreme Court’s landmark 19th-century opinions that discussed Neilson extensively, such as Le Roy, Morse, and Tilghman. Further, in late 19th-century and early 20th-century American cases and treatises, it was black-letter law that while abstract principles and discoveries could not be patented, a practical application was patent-eligible without the need for inventive application – subject to certain exclusions such as the ‘mental steps’ rule.
As I wrote about last year, the actual origin of the inventive application test was Justice Douglas’s opinion in Funk Brothers, in 1948. The dubious history of the inventive application test in the wake of Funk suggests we would have been better served by following Justice Frankfurter instead of Justice Douglas. For it was Frankfurter’s concurrence that embraced the spirit of Neilson and the historical tradition: the claims to bacterial compositions in Funk were unpatentable not because they added or changed little relative to a law of nature or natural phenomenon, but because the patentee was claiming the idea of compatible strains instead of his practical application.
I write about the hot-blast cases, and the history of the inventive application test, in an article available here.