Get a Job doing Patent Law
One small aspect of Director Michelle Lee’s testimony to congress was that the number of pending pre-GATT applications still pending has been reduced to only 20 – not counting those owned by Gill Hyatt. (She did not mention Hyatt by name, but it was clear who she was talking about.) The PTO has 14 full time patent examiners going after these remaining applications that were all filed prior to June 7, 1995.
These pre-GATT applications are important because they retain the 17-year-from-issuance term. An example is Patent No. 9,376,478 that was recently issued to the Japanese Foundation for Cancer Research and broadly claims: “2. Recombinant Human fibroblast β1 Interferon.” The application was filed June 5, 1995 and looks to be enforceable until 2033. (This particular case was delayed by an interference proceeding).
Gilbert Hyatt apparently continues to have a substantial number of pre-GATT applications pending and is fighting multiple lawsuits against the Government regarding the applications. According to his own court filings, Hyatt has more than 400 pending applications, most of which have been pending for over twenty years and more than a dozen pending for more than 35 years.
In Hyatt v. OMB, Civ No. 16-1944 (D.Nevada, Filed August 16, 2016), Hyatt explains that he “has experienced first-hand the unnecessary, duplicative, and overly burdensome information collection demands that the PTO imposes on individuals seeking patents.” The lawsuit asks for an order that the OMB consider Rules 111, 115, and 116 (37 C.F.R. Sections 1.111, 1.115, and 1.116) and hold them subject to the requirements of the Paperwork Reduction Act.
In Hyatt v. USPTO, Civ. No. 16-1490 (D.Nevada, Filed June 22, 2016), Hyatt asks for injunctive relief to stop the PTO from repeatedly ‘reopening prosecution’ in his cases and consequently shielding the cases from judicial review by either the PTAB or Article III courts. Hyatt is experiencing the common reality of examiners reopening prosecution once an appeal brief is filed.
Background:
The court in Newegg Inc. v. Ezra Sutton, PA (CV 15-01395 TJH C.D. Cal. Sept. 2016) (here), faced some interesting facts. Boiled down, a lawyer representing a co-appellee of Newegg at the Federal Circuit copied a substantial portion of a draft brief written by a lawyer for Newegg, and filed it.
According to news reports, after that, the lawyer withdrew that brief and filed a shorter one which, allegedly, still was based substantially on Newegg’s draft brief. Newegg then registered copyright for its brief after they were filed, covering both the draft and final brief. (My mind wonders… if you register copyright on a draft brief, what’s the scope of waiver?) Then Newegg sued the lawyer for copyright infringement.
Rather than raising fair use right away, the defendant lawyer late in litigation moved to amend the final pre-trial order to add fair use as an affirmative defense; and the plaintiff moved for partial summary judgment on infringement. In an order granting the defendant lawyer’s motion to amend the final pre-trial order to add fair use, the district court held that there was no fair use on summary judgment. Thus, the lawyer was liable.
This creates some very interesting problems for lawyers, and calls to my mind the case a few years ago where a patent prosecutor was sued for using language from a patent in a specification for another client. I’m not a copyright lawyer, and so just raise this case for you to think.
TC Heartland v. Kraft Foods (Supreme Court 2016) [Petition for Writ of Certioari]
Patent litigation continues to be concentrated in a small number of venues. This case is potentially a big deal because it could eliminate this concentration — especially patent cases in the E.D.Texas. Both the PTO and Congress appear in favor of venue reforms, but statutory reforms will likely wait until the Supreme Court decides TC Heartland.
Background: The scope of patent venue is codified in 28 U.S.C. § 1400(b) and limits venue to judicial districts “where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.” At first glance, this venue statute would seem to significantly limit venue — For instance, few patent infringement defendants actually reside or have a place of business in the E.D. Texas. That narrowness was confirmed in the Supreme Court’s decision in Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222 (1957). The issue in Fourco Glass involved the parallel statute of 28 U.S.C. § 1391 (titled “Venue generally”) that broadly defined a corporation’s residence to include “any judicial district in which it is … licensed to do business or is doing business.” Despite the seeming broadening statutory definition, the Supreme Court held that the more general Section 1391(c) could not be used to expand venue beyond what was contemplated in Section 1400(b). Rather, the court held that “where the defendant resides” in § 1400(b) is limited to “the state of incorporation only.” Fourco Glass.
We hold that 28 U.S.C. § 1400(b) is the sole and exclusive provision controlling venue in patent infringement actions, and that it is not to be supplemented by the provisions of 28 U.S.C. § 1391(c).
Id.
In 1988 Congress amended 1391(c) to expand the definition of residency “for all venue purposes” to include “any judicial district in which such defendant is subject to the court’s personal jurisdiction.” Based upon that change, the Federal Circuit determined in 1990 that Fourco Glass had been implicitly overruled and that the new provision of 1391(c) now does redefine and greatly expand Section 1400(b) even though the legislative history of the 1988 amendment did not discuss patent venue. VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (Fed. Cir. 1990).
The chart below from the cert petition shows the 1988 statutory change that the Federal Circuit found sufficient to indicate an overruling of Fourco Glass.
It is this 1990 combination of 1400(b)/1391(c) that is now the status quo – venue is proper in any any federal court that has personal jurisdiction over the accused infringer.*
TC Heartland challenges the VE Holding interpretation offering broad venue. It writes:
The question in this case is thus precisely the same as the issue decided in Fourco: Whether 28 U.S.C. § 1400(b) is the sole and exclusive provision governing venue in patent infringement actions and is not to be supplemented by 28 U.S.C. § 1391(c).
The Supreme Court previously decided patent venue in Stonite Products Co. v. Melvin Lloyd Co., 315 U.S. 561 (1942) and also held that the specific patent venue provisions should prevail and remain unmodified by the general venue provisions.
I’ll be happy if TC Heartland wins because it will make it much easier for me to watch patent cases here in Missouri.
The new petition is filed by James Dabney and John Duffy who were the forces behind KSR v. Teleflex.
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* The one major caveat is that Congress again amended 1391(c) in 2011 and the associated legislative history suggests a Congressional recognition that “VE Holding is the prevailing law.” Update and Correction – On suggestion from a reader, I followed chased down the above quote – it does not actually come from the Congressional Record but instead is Judge Moore’s conclusion found in the TC Heartland case. The opinion states:
In fact, before and after these [recent] amendments, in the context of considering amending the patent venue statute, Congressional reports have repeatedly recognized that VE Holding is the prevailing law.
For its conclusion, the court cites several Congressional reports that I have not read: “See H.R. Rep. No. 110–314, at 39–40 (2007); S. Rep. No. 110–259, at 25 (2008); H.R. Rep. No. 114–235, at 34 (2015) (stating that “Congress must correct” our holding in VE Holding by amending § 1400); cf. Venue Equity and Non-Uniformity Elimination Act of 2016, S. 2733, 114th Cong. § 2(a) (2016).” An important note with this is that the court did not identify any record contemporaneously with the 2011 report that suggests a conscious choice to keep VE Holding as the prevailing law.
by Dennis Crouch
McRO v. Bandai Namco, et al. (Fed. Cir. 2016)
In an important Eligibility case, the Federal Circuit has ruled that MRCO’s software patent claims are eligible — rejecting District Court Judge Wu’s judgement on the pleadings that the non-business-method claims are invalid as effectively claiming an abstract idea. In my 2014 post in the case I wrote that the case may serve as an opportunity fo the Federal Circuit “to draw a new line in the sand.”
The invention at issue is directed toward a specific problem that had troubled the field of animation – automatically animating lip synchronization and facial expression of animated characters. See U.S. Patent Nos. 6,307,576 (“‘576 Patent”) and 6,611,278 (“‘278 Patent”). The patented method employed by the invention is to key the audio signal to a set of phenome sequences and then create a set of morph-weight-set streams used as input sequences for the animated characters. The morph stream input provides both timing and movement of facial expressions, including emotion. The inventions claim priority back to 1997.
In its decision, the Federal Circuit holds “that the ordered combination of claimed steps, using unconventional rules that relate sub-sequences of phonemes, timings, and morph weight sets, is not directed to an abstract idea and is therefore patent-eligible subject matter under § 101. Accordingly, we reverse.” Thus, the court followed its precedent in Enfish and holds here that the claims do not even meet Alice Step-One. In addition to the 20+ defendants, briefs were also filed by EFF, Public Knowledge, BSA and The Software Alliance. The Decision here was authored by Judge Reyna and joined by Judges Taranto and Stoll.
A patent may not effectively cover an abstract idea, law of nature, or natural phenomena. Alice Corp. The Supreme Court in Alice/Mayo established its two-step framework that first asks whether a patent claim is “directed to” one of these eligibility exceptions. If so, the claim can be saved if it also includes an “inventive concept” that sufficiently transforms the nature of the claim. However, “[i]f the claims are not directed to an abstract idea, the inquiry ends.” McRO at 20.
One problem with the two step framework is based upon the fact that all inventions can be boiled down to an ineligible abstract idea. In Mayo, the Supreme Court recognized this risk in its statement that “all inventions at some level embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas.” This starting point, risks removing any teeth from Alice/Mayo Step-1. The Federal Circuit, however, has refused to follow that pathway but instead has set down precedent that courts “must be careful to avoid oversimplifying the claims” in seeking a gist or abstraction. TLI Commc’ns.
A second problem with the framework is that the meaning of “abstract” has not been fully defined. Here, the Federal Circuit attempts to provide a rough framework based upon the idea of preemption. The court looked particularly for (1) specific limitations that help avoid preemption (e.g. Morse); and (2) more than merely automation of existing human activity. The court also emphasized that the eligibility analysis must consider the claim as a whole.
The court writes:
Here, the structure of the limited rules reflects a specific implementation not demonstrated as that which “any [animator] engaged in the search for [an automation process] would likely have utilized.” Myriad. By incorporating the specific features of the rules as claim limitations, claim 1 is limited to a specific process for automatically animating characters using particular information and techniques and does not preempt approaches that use rules of a different structure or different techniques. See Morse. When looked at as a whole, claim 1 is directed to a patentable, technological improvement over the existing, manual 3-D animation techniques. The claim uses the limited rules in a process specifically designed to achieve an improved technological result in conventional industry practice. Alice. Claim 1 of the ’576 patent, therefore, is not directed to an abstract idea.
I have pasted claim 1 below:
1. A method for automatically animating lip synchronization and facial expression of three-dimensional characters comprising:
obtaining a first set of rules that define output morph weight set stream as a function of phoneme sequence and time of said phoneme sequence;
obtaining a timed data file of phonemes having a plurality of sub-sequences;
generating an intermediate stream of output morph weight sets and a plurality of transition parameters between two adjacent morph weight sets by evaluating said plurality of sub-sequences against said first set of rules;
generating a final stream of output morph weight sets at a desired frame rate from said intermediate stream of output morph weight sets and said plurality of transition parameters; and
applying said final stream of output morph weight sets to a sequence of animated characters to produce lip synchronization and facial expression control of said animated characters.
Guest Post from Professors Arti Rai and Colleen Chien.
“I know well the difficulty of drawing a line between the things which are worth to the public the embarrassment of an exclusive patent, and those which are not.“ – Thomas Jefferson, 1813
Santa Clara –Duke Law Patent Quality Conference: Patent Quality – It’s Time
At 1 pm today, USPTO Director Michelle Lee will be testifying before the House Judiciary Committee at a USPTO Oversight Hearing. The hearing will focus on questions of patent quality raised by two recent GAO reports (here and here) as well as the issue of examiner reporting of time raised by a report by the Department of Commerce’s Office of the Inspector General (here).
As we have discussed, the two of us are following closely the USPTO’s efforts to address issues of patent quality through its Enhanced Patent Quality Initiative (EPQI) – an urgent but also enduring challenge that one of our nation’s first patent examiners, Thomas Jefferson, struggled with. Our institutions, the Duke Law Center for Innovation Policy and the Santa Clara High Tech Law Institute, are also co-sponsoring two conferences on EPQI and other levers for improving patent quality.
On Friday, September 9, we held the first of these conferences at Santa Clara Law School. The conference brought together Deputy Commissioner for Patent Quality Valencia Martin-Wallace, Deputy Commissioner for Patents Andy Faile, former PTO Director David Kappos, EPO Director of Quality Support Alfred Spigarelli, GAO officials, industry representatives, and legal academics. Here we provide a brief summary of the event. Video and links to the presentations and related papers will be available here (a uncut version of the video is here). Several of the commentators will be publishing op-ed versions of their remarks with IPLaw360 from now until the December 13, 2016 conference, and the Berkeley Technology Law Journal has published short commentaries from a number of the speakers on their topics.
Valencia Martin-Wallace began by highlighting 6 aspects of the EPQI: case studies the USPTO is implementing in response to stakeholder requests; the Master Review Form (MRF), which is now being used as the exclusive review form by the Office of Patent Quality Assurance; other quality metrics; USPTO study of post-grant outcomes for purposes of improving ex ante patent examination, both in child applications of parents there are the subject of a post-grant review and more generally; a post-prosecution pilot; and a clarity of the record pilot.
Martin-Wallace’s comprehensive discussion of the MRF and quality metrics honed in on the difficult question of what quality means and how the PTO should measure it. According to the USPTO, the MRF’s focus on clarity and correctness of the examination is a key aspect of how the agency measures product quality. The agency is also very interested in process quality, by which it means a focus on reducing rework and ensuring consistency. The USPTO will also continue to monitor perceptions of quality through internal and external quality surveys. USPTO Case studies on 101 – the compliance of rejections with 35 U.S.C. 101 Official Guidance and the consistency of the application of 101 across art units/technology centers – will be issued on September 30 and December 9 respectively. They will be followed by case studies on other types of rejections.
Martin-Wallace’s presentation was followed by a panel discussion of claim clarity and examination consistency. Peter Menell discussed how claim clarity could be improved through a claim template [link] and the importance of putting all interactions with the examiner into the record. Charles Duan also highlighted the importance of a clear prosecution record, particularly for purposes of allowing courts to find claim scope disavowal. Jay Kesan focused on the lack of standardized claim language in software and suggested mechanisms for improving standardization. Finally, Xavier Jaravel of Stanford presented his research with Josh Feng of Harvard showing that NPEs tend to purchase patents granted by lenient examiners that are incremental and vaguely worded; they estimate that a one-standard deviation change in the “examiner effect” could lower the rate of litigation and NPE purchased patents by 50%.
The conference then turned to issue of examiner time allocation, and in particular ensuring adequate time for search. Deputy Commissioner for Patent Operations Andy Faile outlined the count system and the time that examiners are given to achieve each count. On the first round of examination, examiners receive 1.25 counts for the first office action; 0.25 counts for the final rejection in that round; 0.75 counts for an allowance disposal: and 0.5 counts for termination of the first round of examination (“abandonment”). The time allocated to achieve each count is a function of the area of technology – for example, while 16.6 hours are allocated per disposal in fishing lures, examiners are given almost double that, 27.7 hours per satellite communications disposal. It is also a function of GS-level of the examiner – as in the EPO, senior examiners at the USPTO are expected to produce more work than junior examiners.
Assistant GAO director Robert Marek next discussed highlights from the agency’s studies of patent quality and prior art search. These studies relied heavily on a survey that produced 2669 USPTO examiner respondents. The survey found that 70% of examiners reported having insufficient time to examine applications; the majority reported wanting more time for prior art search; and the majority also reported encountering vague and indefinite claims. Examiners also reported conducting only limited searches for non-patent literature (NPL). On the issue of search, the GAO recommends that the PTO develop guidance of what constitutes a good prior art search; identify key sources of NPL; monitor search quality; and assess the time examiners need for search. On claim clarity, GAO recommends the PTO consider requiring patent applicants to include term glossaries or claim charts.
The morning concluded with a panel discussion of prior art search and time. Colleen Chien discussed the findings of a recently released study that suggests that the EPO is much more likely to cite NPL in its search reports than PTO examiners are to rely upon NPL in their examination, despite that the PTO’s examiners are more likely to receive NPL, through IDS’. The paper argues that that the greater amount of time that EPO examiners spend on search (8-12 hours per app, vs. 4-5 hours at the PTO), contributes to this difference. However, the PTAB, which intensely reviews challenged patents, appears to cite NPL even more than EPO examiners do. Michael Frakes and Melissa Wasserman then summarized their empirical research on 1.4 million utility patent applications initiated after March 2001 and disposed of by July 2012. Their research suggests that tightening of examiner time constraints as they move up GS-levels appears to lead to more grants, less examiner citation of prior art, and fewer time-intensive non-obviousness rejections. Their analysis, which follows examiners as they rise up GS-levels within art units, capitalizes on the essentially random assignment of applications within an art unit and employs an examiner fixed-effect design. Moderator Karen Wong called the After Final Consideration Pilot 2.0 one of the PTO’s best inventions, and Steven Reid and others noted that the Post-Prosecution Pilot (P3) examination was also a valuable option for achieving resolution without the need for a full request for continued examination (RCE).
Jay Kesan and Colleen Chien kicked off the afternoon with a discussion of the differences between EPO and USPTO processes (the former bifurcates search and examination, doesn’t allow for continuations (but does tolerate divisionals), and charges higher fees, earlier), perceptions of the two institutions (based on a recent survey of ~650 practitioners), and outcomes. Drawing upon matched pair analysis, Kesan’s research suggests that on average EPO patents have fewer claims, and the claims are longer and have greater pendency. Chien’s paper suggests that the lower EPO allowance rate isn’t driven by a higher rejection rate but more applicant withdrawals.
EPO Patent Quality Director Alfred Spigarelli’s presentation was titled: “Patent Quality: Get it Right the First Time.” He emphasized the human resources component of the patent quality equation, from the hiring standards the EPO applies (e.g. examiners must be able to actively work in three languages), to the training each EPO examiner receives, to the low turnover rate. Search is viewed as the cornerstone of the patent examination process, with 60% of time dedicated to search.
On the panel that followed (“Once and Done” and Differentiating Between Patents), Laura Sheridan outlined a proposal to increase quality and predictability by introducing greater finality into the patent application process. Under Sheridan’s proposal, examination would terminate after a predetermined maximum number of office actions, and the application would be then adjudicated by a panel. Steven Yelderman discussed the dynamic effects on RCE practice of recent changes to fees as well as mechanisms by which post-grant review could feed information back into initial patent examination. Sandy Swain discussed steps that could be taken by applicants now, without any policy changes, stressing the importance of open communication and clear documentation. Alan Marco presented a study in progress of litigated patents, suggesting that small entities are more likely to litigate and finding that (with the exception of continuations) applicant characteristics are more likely to be predictive of litigation than examination characteristics.
Studies have shown that delays in patent examination are detrimental to startup firms. For these firms, long pendency could be considered a sign of poor examination quality. Building on this work, Arti Rai discussed her ongoing research on accelerated examination through the Track 1 program. She finds that the program is in fact disproportionately used by small and micro entities. However, the top filers in the program are large entities, and she is studying whether their applications show signs of poor quality. Josh Makower, an investor, inventor, and entrepreneur in the biotechnology and medical device industry, said that all his startups used TrackOne, underscoring the importance of patents to them. According to Oskar Liivak’s interpretation, 35 USC 115 makes it a felony for a patent applicant to claim more broadly than the actual invention. Brian Love noted that the EPQI had two important gaps – already granted patents and the flexing of the USPTO’s fee-setting authority. He recommended raising maintenance fees to cull low-value, low-quality patents and decreasing PTAB fees. Love’s proposals generated vigorous discussion.
Dave Kappos provided the final keynote of the day, noting that patent quality has been a focus for as long as we’ve had a patent commissioner. He noted that many efforts he oversaw during his administration to increase quality – giving examiner 2.5 more hours of time, redesigning the IT system, creating the Edison Scholar program, ensuring Examiner received training from industry experts, and many more. What didn’t work, he noted, was working with the AIPLA to devise a set of quality indicia for applicant filings that all agreed upon and that could be applied to applications. What he would work on, were he still in office, would include Track 3 (some version of deferred examination) and allocation of more time, not across the board, but as appropriate.
How will we know if the EPQI has been successful in two years? When this question was posed to them, closing panelists Faile, Martin-Wallace, and PTO Silicon Valley Director John Cabeca mentioned a few milestones: greater transparency and engagement of all members of the patent community, creative rethinking of the count system, more time for certain applications, and the leveraging of state of the art examination processes and resources.
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Arti Rai is the Elvin R. Latty Professor of Law at Duke Law School and co-Director, Duke Law Center for Innovation Policy. Colleen Chien is Associate Professor of Law at Santa Clara University School of Law.
By Jason Rantanen
Stryker Corp. v. Zimmer, Inc. (Fed. Cir. 2016) Download opinion
Panel: Prost (author), Newman, Hughes
Stryker prevailed in a patent infringement suit against Zimmer, obtaining partial summary judgment of infringement as to some claims, a jury verdict of infringement as to another claim, and a jury finding that the claims were valid. The jury awarded Striker $70 million in lost profits, further finding that Zimmer’s infringement was willful. In a post-trial order, the district judge awarded treble damages, found the case exceptional and awarded Stryker its attorneys’ fees.
On appeal, the Federal Circuit affirmed as to infringement, validity and damages. Applying In re Seagate, however, it reversed as to willful infringement and the enhancement of damages. Based on that reversal, it also vacated the award of treble damages and attorneys’ fees. Styrker sought, and obtained, review by the Supreme Court in a case that was consolidated with Halo Electronics., Inc. v. Pulse Electronics., Inc. In Halo v. Pulse, the Supreme Court held that the the Federal Circuit’s two-part Seagate “test for determining when a district court may increase damages pursuant to § 284” was not consistent with § 284. Both Halo and Stryker were remanded to the Federal Circuit for further proceedings. Last month, the Federal Circuit issued its revised opinion in Halo. Today, the court released the revised Stryker opinion.
Most of the new Stryker opinion involves a recitation of the Federal Circuit’s previous opinion affirming the district court as to infringement and validity. The last three pages, however, deal with the § 284 enhancement issue on remand. What’s interesting is that the Federal Circuit is maintaining its bifurcated approach to enhancement of damages, first requiring a predicate willfulness determination followed by the judge’s discretionary determination of whether and how much to enhance damages. This is essentially the same process as before. See i4i Ltd. Partnership v. Microsoft Corp., 598 F.3d 831 (2010). Pre-Halo, the second step of the process (the district judge’s determination of whether and how much to enhance damages) was a totality-of-the circumstances analysis that was reviewed for abuse of discretion (i.e.: basically the same as the court required in Halo). Id. The Federal Circuit’s post-Halo approach to enhancement involves the same two steps, with the exception that the willfulness determination itself is guided by the holding in Halo rather than requiring the two-element objective/subjective determination of Halo. (The enhancement determination is too, but it’s hard to see much difference there.) Under Halo, the subjective component alone can be enough to establish willfulness.
Here, Zimmer did not challenge the subjective component so the Federal Circuit affirmed willfulness on remand. However, it then remanded the case back to the district court for a further determination as to whether and how much damages should be enhanced. In Halo, this remand made sense, as the district judge had relied on the Seagate test to grant JMOL of no willful infringement over a jury verdict of willful infringement. Here, however, after the jury found willful infringement and the district judge denied JMOL of no willful infringement, the district judge exercised his discretion to treble damages. The consequence is that a remand in this case is somewhat odd given that the district judge has already made a discretionary determination to award the maximum amount of enhancement. In any event, the Federal Circuit decided that the better course of action was to ask the district judge to re-make the discretionary determination:
“As Halo makes clear, the decision to enhance damages is a discretionary one that the district court should make based on the circumstances of the case, ‘in light of the longstanding considerations . . . as having guided both Congress and the courts.’ Id. at 1934. Thus, it is for the district court to determine whether, in its discretion, enhancement is appropriate here. We therefore vacate the district court’s award of enhanced damages and remand to the district court so that it may exercise its discretion.”
Based on a similar rationale (although relying instead on Octane Fitness v. ICON), the Federal Circuit also remanded on the issue of attorney’s fees.
Disclosure: I co-authored an amicus brief in support of neither party in Halo v. Pulse.
Asia Vital v. Asetek Danmark (Fed. Cir. 2016),
Article III Federal Courts only have jurisdiction over caess where a substantial and current controversy exists between the parties. in 2014, Asia Vital (AVC) sued Asetek in E.D. Virginia – asking the district court for a declaratory judgment of non-infringement of the claims of Asetek’s U.S. Patent Nos. 8,240,362 and 8,245,764. The district court dismissed the case for lack of subject matter jurisdiction — finding no substantial controversy. On appeal, however, the Federal Circuit has reversed that opinion – finding a substantial controversy.
The Asetek patents cover liquid cooling systems used to cool integrated circuits (such as those on a computer). Over the past several years, Asetek has sued several competitors for infringing the patents including CoolIT and Cooler Master. In 2014, Asetek sent AVC a letter accusing the company of infringing — however the letter mistakenly accuesd AVC of manufacturing the Liqmax 120s (it does not). After some letters back-and-forth, Asetek eventually sent a letter that it “believes that AVC is likely selling other infringing products in the United States.” After an unsuccessful meeting, AVC filed its declaratory judgment action. The question is whether these facts are sufficient to show an actual controversy between the parties.
The leading precedent actual-controversy precedent for patent cases is the Supreme Court’s 2007 decision in MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007) In MedImmune, the Court explained the test as “whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.” The ongoing principle is that the controversy must be based upon a “real and immediate injury or threat of future injury that is caused by the [DJ] defendants.”
In the patent context, the court has held that jurisdiction does not arise merely based upon learning of the existence of a patent or by a perception of a risk of infringement unless there is an affirmative act by the patentee.
Here, the Federal Circuit found ample evidence of action by the patentee. The one missing element was the lack of evidence that Asetek directed its accusations toward AVC’s actual products (the K9 and K7 products). The court noted the lack of product specific accusation, but still found Asetek’s actions “sufficient to conclude that a substantial controversy between the parties existed at the time of the complaint.” The court writes:
Asetek relies heavily on the fact that it never referenced AVC’s particular products or product line as potentially infringing, and, in fact, did not even know of AVC’s products at the time of the complaint. . . . The question of jurisdiction does not turn on Asetek’s knowledge of the specific AVC products or whether Asetek specifically alleged that the K7 and K9 products infringed the asserted patents; instead, the question is whether, under all the circumstances, Asetek’s actions can be reasonably inferred as demonstrating intent to enforce a patent.
Id. (internal citations omitted).
Get a Job doing Patent Law
by Dennis Crouch
I am generally in favor of additional Congressional oversight of the U.S. Patent & Trademark Office – this is especially true because members of the House and Senate Judiciary Committees tend to be smart, well informed, and act with intention to improve the patent system.* Although partisan politics do come into play, much of the focus tends to be on real issues and real solutions. The oversight process forces additional USPTO transparency and is the standard mechanism for getting information from Executive Agencies. On this point, I will note that the information exchange is often done in the background lead-up to the actual hearing — thus, although a hearing might not be too exciting or informative, the associated deadlines force the new communications.
The House Judiciary Committee’s Subcommittee on Courts, Intellectual Property, and the Internet has set its next oversight hearing for Tuesday, September 13 at 1:00 pm E.T. Michelle Lee is expected to testify both about general USPTO operations as well as the recent Inspector General’s review of potential time and attendance fraud. Although the subcommittee chair – Rep Darryl Issa – is a bit combative and divisive, he is also always well informed and practically minded. The hearing is also expected to address USPTO’s implementation of the America Invents Act (AIA); abusive patent litigation; and patent quality — all within the context of promoting innovation and creating American jobs.
USPTO Director Michelle Lee will testify at the hearing. No other witnesses have been released (and it is likely that none-others will be present).
On the issue of the Inspector General’s report, I substantially agree with Matt Levy’s Washington Post Letter titled “Cries of ‘fraud’ at the patent office are overblown.” Working out the numbers, Levy finds the average unaccounted-for hours are 6-minutes per day. I would additionally add that most of us in the patent law industry are focused more on whether patent examiners are doing quality work in a timely manner — that was happening, but the examiners were essentially a bit too efficient as judged by the parallel time and examination-quota requirements. My largest caveat is that the unaccounted-for hours were not evenly distributed as implied by Levy’s letter. Rather, the IG report highlights the fact that a relatively small number of examiners claimed a large percentage of the total unaccounted-for hours (based purely on a computer database analysis). I would think that those particular examiners should be reviewed to ensure that there was no actual fraud. The IG report suggested (but did not actually state) that such a review would be improper under the law, and I expect that one aspect of the hearing will focus on that question.
Levy’s also makes the important point that the fraud charges in the media are likely to shift attention away from the patent quality improvements that should be the agency’s major focus.
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* My position may well change if major control shifted to, for instance, the Energy & Commerce Committee.
by Dennis Crouch
Three eligibility cases are pending before the Supreme Court. Of these, the most interesting is likely Genetic Tech v. Merial. [GeneticTechPetition]
The 1989 priority date of Genetic Tech’s patent reaches back to the heyday of gene discovery and the claims are directed to a technique of detecting gene alleles. U.S. Patent No. 5,612,179. The claimed method is based upon the insight that genes are typically associated non-coding regions of DNA — i.e., based upon a the phenomenon known as “linkage disequilibrirum”, someone who inherits a particular gene from a parent is also likely to inherit the nearby non-coding DNA regions from the same parent. Using that insight, the method amplifies DNA segments containing non-coding region associated with the gene and then checks the sequence of the associated coding section (the gene) that is incidentally amplified – looking for alleles of a known gene.
Genetic Tech explains this process in its petition:
Dr. Malcolm Simons discovered that, in the DNA of unrelated individuals, a polymorphism in a non-coding DNA region and a coding region allele could be inherited together. This natural phenomenon is known as “linkage disequilibrium.” The discovery prompted Dr. Simons to invent a new and useful process for detecting a coding region allele of a multi-allelic genetic locus by interrogating a non-coding DNA sequence that is in linkage disequilibrium with that multi-allelic genetic locus. Dr. Simons’ invention, as reflected in claim 1 of the ‘179 patent, was advantageous for a number of reasons, including that it was more reliable and quicker than prior art identification processes that used direct identification of allelic variants.
A number of companies have licensed the patent, but Merial and Bristol-Myers refused. In the resulting litigation, the district court dismissed the case on the pleadings — finding that the claimed invention lacks eligibility as an unpatentable law of nature under Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289 (2012). On appeal, the Federal Circuit affirmed — holding that the relationship between coding and non-coding sequences was a naturally occurring phenomenon and that the additionally claimed laboratory techniques were used in a routine and conventional manner known at the time. Petitioner argues that patentability can be established by the fact that no one was “using the non-coding sequence as a surrogate marker for the coding region allele …” This novel feature survived both the original examination as well as reexamination.
Questions Presented:
The defendants in this case (Merial and Bristol-Myers) waived their right to respond to the petition. That non-response has accelerated the case with a conference set for September 26. If the case is to move forward, we could expect the court to call for a response (CFR).
I’ll pause here to write a moment about the call-for-response system. The respondent to a Supreme Court petition for certiorari is not required to file a response but can instead waive her right to respond. At that point, the Supreme Court may request that a response be filed. Although the CFR comes from the Court, it is generally known that a single Justice can request the CFR – and that request is often triggered by questions raised by a single clerk. CFRs almost always issue prior to the conference. Bringing this back to the eligibility issue: We perhaps didn’t get the message from the Mayo/Alice Opinions and the Sequenom Denial. If it turns out that not even a single Justice (or Clerk) seeks a response in this case, we should understand that the Supreme Court believes it has sufficiently spoken on the issue of eligibility.
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The two additional eligibility cases pending are Jericho Systems Corporation v. Axiomatics, Inc., et al., No. 15-1502 (Eligibility of Patent No. 8,560,836 under Section 101) and Essociate, Inc. v. Clickbooth.com, LLC, et al., No. 16-195 (please clarify the meaning of ‘abstract idea’ and ‘inventive process’).
by Dennis Crouch
When the Supreme Court’s October 2016 Term begins in a few weeks, its first patent hearing will be the design patent damages case of Samsung v. Apple. In Samsung, the Court asks: Where a design patent is applied to only a component of a product, should an award of infringer’s profits be limited to those profits attributable to the component? The statute at issue – 35 U.S.C. § 289 – indicates that, someone who (without license) “applies” the patented design (or colorable imitation thereof) to an article of manufacture, “shall be liable to the owner to the extent of his total profit.” Up to now, courts have repeatedly held that the “profits” are profits associated with the product (i.e., the article of manufacture) being sold, but Samsung is asking that the profits be limited only to components of the product closely associated with the patented design. Although Apple’s position is supported by both the text and history and is the approach easiest to calculate, I expect that many on the Court will be drawn to the potential unjust outcomes of that approach. Apple wins in a 4-4 split. Oral arguments are set for October 11, 2016.
The court has granted certiorari in two other cases for this October 2016 term with briefing ongoing. In Life Tech v. Promega, the court again takes up the issue of exporting components of a patented invention and the extraterritorial application of US law. 35 U.S.C. § 271(f)(2). The question here is whether export of one component can legally constitute the “substantial portion of the components” required by statute for liability to attach. In the case, the component (Taq) is a commodity but is also an admitted critical aspect of the invention. In SCA Hygiene v. First Quality, the Court asks whether the equitable defense of laches applies in patent cases. The case is a follow-on to the Supreme Court’s 2014 holding in Petrella v. MGM that laches does not apply in copyright cases. In its decision, the Federal Circuit distinguished Petrella based both upon statutory and policy arguments. Oral arguments in SCA are set for November 1, 2016.
The three pending petitions most likely to be granted certiorari are Impression Products (exhaustion); Amgen (BPCIA); and GlaxoSmithKline (antitrust reverse payments) However, these cases are awaiting views of the Solicitor General — which likely will not be filed until well after the presidential election.
A substantial number of cases are set for the Supreme Court’s September 26 conference. These include the constitutional challenges to IPR coming in MCM and Carl Cooper as well as the interesting eligibility case of Genetic Tech v. Merial.
It looks to be an interesting term.
The big list:
Veritas Tech v. Veeam Software (Fed. Cir. 2016)
In an important decision, the Federal Circuit issued a limited rejection of Inter Partes Review amendment procedure — holding that the PTAB acted in an arbitrary and capricious manner by denying the patentee’s motion to amend its challenged claims.
Although claim amendments are officially allowed in IPR proceedings, the Patent Trial & Appeal board has a practice of only approving amendments after the patentee shows that the claims as amended are patentable over the references at issue in the case. As part of this process, the PTAB requires that the patentee discuss each feature added to the claim and “whether the feature was previously known anywhere, in whatever setting, and whether or not the feature was known in combination with any of the other elements in the claim.” Toyota Motor Corp. v. American Vehicular Sciences LLC, IPR2013-00419, slip op. at 4–5 (Paper 32) (PTAB March 7, 2014).
Here, the patentee did not discuss each new feature individually but rather merely stated that the combination of new features were not described in the prior art. And, because the patentee failed to discuss each added feature separately, the PTAB found that the patentee “failed to meet its burden of showing that it is entitled to an award of a patent on a system having those features.”
On appeal, however, the Federal Circuit rejected that analysis — finding it “arbitrary and capricious.” In particular, the court wrote that the discussion of the combination was not “meaningfully different” from the PTAB’s proposal.
In this case, we fail to see how describing the combination is meaningfully different from describing what is new about the proposed claims, even in comparison to the unamended claims.
This case may have some impact on the pending en banc appeal In re Aqua Products. That appeal addresses the following two questions:
(a) When the patent owner moves to amend its claims under 35 U.S.C. § 316(d), may the PTO require the patent owner to bear the burden of persuasion, or a burden of production, regarding patentability of the amended claims as a condition of allowing them? Which burdens are permitted under 35 U.S.C. § 316(e)?
(b) When the petitioner does not challenge the patentability of a proposed amended claim, or the Board thinks the challenge is inadequate, may the Board sua sponte raise patentability challenges to such a claim? If so, where would the burden of persuasion, or a burden of production, lie?
The Veritas court writes that the PTAB decision here is erroneous regardless of the outcome of Aqua.